Are you ready to discover how to legally reduce your tax bill in 2026? Millions of Brits are facing higher tax bills due to recent budget changes, but there are strategies you can employ to keep more of your hard-earned cash. Here are five effective ways to do so, including a simple 10-minute trick that anyone can do.
Team up with your spouse
Did you know that you can transfer a portion of your Personal Allowance to your spouse or civil partner? This is a clever tax loophole that can save you up to £252 a year. By doing so, you can reduce your joint tax bill and keep more money in your pocket. To be eligible, both partners must be married or in a civil partnership, and one partner must pay basic-rate Income Tax.
Sacrifice your salary
Salary sacrifice is a powerful tool to reduce your tax bill and boost your income. By swapping some of your wages for benefits like a pension contribution, company car, or childcare voucher, you can lower your taxable income. However, be aware that the government has announced a change to salary sacrifice, limiting its use to £2,000 a year from April 2029. So, act quickly to make the most of this benefit.
Get paid for work expenses
Claiming tax relief on work expenses is another way to reduce your tax bill. If you spend your own money on items needed for work, such as uniforms, tools, travel, or overnight costs, you can claim back a portion of that expense. The amount you receive depends on your tax rate and the amount you've spent. It's a straightforward process that can take less than 10 minutes to complete.
Claim tax relief on your car
If you drive a car or van for work, you may be eligible for tax relief on your mileage. You can claim 45p per mile for the first 10,000 miles or 25p per mile for any distance over that. Additionally, if you carry a passenger, you can claim an extra 5p per mile. Keep a log of your mileage and use apps like Driversnote or Fuelio to make the process easier. Just be sure to avoid claiming for personal mileage.
Keep more of your child benefit
If your earnings are close to the child benefit threshold, you can use pension contributions or salary sacrifice to reduce your taxable income. This allows you to keep more of your child benefit. For example, if you earn £61,000 a year, paying £1,000 into your pension can help you retain all your child benefit. However, be mindful of the changes to child benefit rules announced in the Budget, which may impact your ability to use this loophole from April 2029.
But here's where it gets controversial... The government's proposed changes to salary sacrifice and pension contributions may limit your ability to reduce your taxable income and keep more of your child benefit. So, it's essential to act quickly and explore these options while you can. Don't miss out on these potential tax savings! What do you think about these strategies? Do you have any other tips for reducing your tax bill? Share your thoughts and experiences in the comments below!
