4 smart strategies to pay less tax in the new financial year

In the past 12 months, the government has announced numerous changes to how income, savings, investments, and inheritance are taxed. From rising rates to frozen tax thresholds and reduced allowances, many of these changes aim to increase revenue for HMRC.

As a result, your tax bills could increase in the years ahead.

With the tax year ending on 5 April 2026, you may be wondering how you could mitigate rising tax bills in 2026/27.

Read on to discover four smart ways to potentially pay less tax in the new financial year.

Individual Savings Accounts (ISAs) are tax-efficient wrappers in which you can grow your wealth through saving and investing.

In 2026/27, you can deposit up to £20,000 across all adult ISAs without being taxed on your interest or investment growth. This tax-efficient allowance can be spread across four main ISA types:

• Cash ISAs: Savings grow with tax-free interest.
• Stocks and Shares ISAs: Investments grow with tax-free returns.
• Innovative Finance ISAs: Less liquid investments, such as peer-to-peer loans and crowdfunding, grow with tax-free returns.
• Lifetime ISAs (LISAs): Savers can receive a 25% government bonus on contributions up to £4,000 a year, subject to strict criteria.

It’s worth noting that 2026/27 may be the final tax year in which you can save the full £20,000 allowance into a Cash ISA. From April 2027, the Cash ISA allowance will effectively reduce to £12,000 a year for under-65s.

You will still have an overall allowance of £20,000, but the remaining £8,000 will be reserved for investing.

If you’re saving for a child’s future, you could also save or invest a further £9,000 a year tax-efficiently using a Junior ISA (JISA). These accounts enjoy the same tax benefits as your adult ISAs.

Using ISAs rather than standard savings accounts or General Investment Accounts (GIAs) could have a significant impact on your tax bills.

2. Plan your tax-efficient allowances strategically 

For savings and investments held outside of an ISA, you may be able to earn a limited amount of interest or investment income without being subject to tax.

In 2026/27, you have several tax-efficient allowances available:

By using your allowances strategically, you may be able to significantly reduce the amount you pay to HMRC in 2026/27.                This could include:

• Spreading your capital gains across multiple tax years to make the most of the Annual Exempt Amount.
• Planning when your savings mature to avoid earning all your interest in a single year and exceeding your PSA.
• Sharing allowances with your partner, which can effectively double the amount you can earn tax-efficiently as a couple.

Note that any unused allowances cannot be carried forward into the following tax year.

3. Contribute to your pension

Paying into a pension can deliver multiple tax-efficient benefits.

Firstly, you can typically claim tax relief on pension contributions at your marginal rate of Income Tax, provided you don’t pay in more than your annual earnings. While 20% is usually applied automatically, with the funds added straight to your pension pot, higher- and additional-rate taxpayers can claim a further 20% or 25%, respectively, and receive the funds directly.

Secondly, you may be able to reduce your National Insurance (NI) bill by paying into your workplace pension via salary sacrifice if your employer offers this option. These schemes effectively reduce your income in exchange for the value being added to your pension, resulting in a lower NI bill.

However, the government announced that the benefits of salary sacrifice will be limited to contributions up to £2,000 from April 2029 onwards.

Finally, pensions provide a tax-efficient wrapper for growing your retirement savings. Funds held in a pension are generally invested, and the returns are exempt from Capital Gains Tax (CGT) and Dividend Tax.

So, if you’re looking to reduce your Income Tax bill and grow your wealth tax-efficiently, it could be worth increasing your pension contributions.

4. Donate to charity

Giving money or other assets to charity could also help reduce your tax bill. There are four ways to donate to charity tax-efficiently:

• Use a payroll giving scheme: Some employers offer the option to donate to charity directly from your salary. The donation is made before Income Tax and NI are calculated, reducing the amount of tax you pay.
• Donate with Gift Aid: If you qualify for Gift Aid, you can sign a declaration with the charity that allows them to claim an extra 25p from the government for every £1 you donate. While this won’t directly affect your tax bill, it means a donation of £125 will only cost you £100.
• Give land, property, or shares: When you donate these assets, you may be able to deduct the value of your donation from your taxable income to reduce your Income Tax bill. You will also generally be exempt from CGT on the gift, even if you sell the assets on the charity’s behalf.
• Leave a charitable legacy in your will: If you leave more than 10% of your estate to charity when you die, your estate may be subject to a reduced rate of Inheritance Tax (IHT) – 36%, rather than the standard 40%.

While donating to charity is unlikely to make you better off financially, these methods could help reduce the amount you pay to HMRC and direct more funds to a cause close to your heart.

Get in touch

The UK’s tax regime is changing constantly, and there are many complexities to consider when looking to mitigate your tax liabilities. For support with tax planning, call 02392 231 448 to find out what we can do for you.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning, tax planning, or will writing.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Workplace pensions are regulated by The Pensions Regulator.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.