Millions of individuals are set to experience higher tax payments by 2026, but there are strategies available to reduce the amount you owe.
Sarah Coles, the head of personal finance at Hargreaves Lansdown, details various aspects such as frozen tax thresholds and council tax hikes that could impact taxpayers.
According to Coles, taking proactive steps early on can help individuals mitigate the potential tax burden that awaits in 2026.
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The personal allowance, which denotes the threshold before individuals begin paying taxes, has been fixed at £12,570 until 2031. Consequently, as income increases, there is a risk of moving into a higher tax bracket.
Come April 2026, the dividend tax rate is slated to rise. The increment will see the rate climb from 8.75% to 10.75% for basic rate taxpayers and from 33.75% to 35.75% for higher rate taxpayers. Additionally, venture capital trusts will witness a reduction in tax relief from 30% to 20% in April 2026.
The inheritance tax nil rate band will stay at £325,000, and the residence nil rate band will remain at £175,000 until 2031. Furthermore, the annual gift allowance for inheritance tax is frozen at £3,000.
Expect another increase in council tax by April 2026. In England, local authorities have the authority to raise council tax by up to 5% each fiscal year without the need for a referendum.
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