Millions of individuals are set to face higher tax bills in 2026, but there are strategies available to minimize the impact on your finances. Sarah Coles, the head of personal finance at Hargreaves Lansdown, offers insights into navigating the upcoming tax changes.
Coles emphasizes the importance of proactive tax planning to mitigate the effects of the impending tax hikes in 2026. By taking early action, individuals can potentially reduce the financial burden associated with the changes on the horizon.
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The personal allowance, currently set at £12,570 until 2031, remains stagnant, posing a risk of pushing individuals into higher tax brackets as their income grows. Moreover, the dividend tax rates are scheduled to increase in April 2026, affecting both basic and higher rate taxpayers. Additionally, the tax relief for venture capital trusts will be reduced from 30% to 20% in the same period.
Inheritance tax thresholds will remain unchanged until 2031, with council tax expected to rise by up to 5% in England each tax year starting from April 2026. The fuel duty cut introduced in March 2022 will gradually revert to pre-cut levels by March 2027, while alcohol duty will rise according to RPI inflation in February 2026.
A new duty of £2.20 per 10ml of vaping liquid will be imposed starting October 2026. Coles recommends five strategies to legally reduce tax obligations in 2026, including maximizing ISA saving accounts, pension contributions for tax relief, salary sacrifice schemes, income-producing assets transfer between spouses, and utilizing the marriage allowance for tax-saving benefits.
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