Since Labour came into government in July 2024, there’s effectively been a tax rise every 10 days.
In fact, this tax year there’s predicted to be around 39.1 million income taxpayers, up from 34.5 million in the 2022-23 tax year and 33 million in 2021-22. And with income tax thresholds now frozen until 2031, even more workers are going to be dragged into paying top rates of tax.
There’s no doubt that taxes are essential in any economy, however that doesn’t mean you should be paying more than your fair share.
Luckily there are some easy, simple, and legal ways to help cut your tax in 2026, while also growing your wealth for the long term.
1. Make the most of your Stocks and Shares ISA
ISAs are one of the best ways of sheltering your money from the taxman. It’s why millions of savers and investors use them every year.
When your money is in an ISA, like the InvestEngine Stocks and Shares ISA, you don’t pay any income or capital gains tax.
In Rachel Reeves’ recent Autumn Budget, the chancellor chose to raise savings tax by 2% from April 2027 and dividend tax by 2% from April 2026.
So for any investments outside of an ISA, it means you’ll be paying more tax if you go over your personal savings and dividend allowances.
Basic-rate taxpayers currently get a personal savings allowance of £1,000, higher-rate taxpayers get £500, while additional-rate taxpayers don’t get any. So, anything over these and you’ll be paying even higher tax.
The current dividend allowance is £500, no matter how much you earn. So that means if you’re a higher earner and go over your dividend allowance, you’ll start paying 35.75% from April.
Could you shelter £40,000 from tax in just a few months?
The silver lining is that the overall ISA allowance is staying the same for now, meaning you get to put away up to £20,000 every tax year.
With the current tax year ending on 5 April, if you haven’t used any of this tax year’s ISA allowance, you can still put up to £20,000 in before then.
And with the new tax year starting on 6 April, you’ll get to put another £20,000 just the day after. That’s potentially £40,000 sheltered from tax in just a few months.
While using your ISA allowance and investing as early in the tax year as possible is best, not everyone will be in the position to do that. But don’t worry, you’ll have the whole tax year to use your 2026/27 ISA allowance, and then you’ll get another £20,000 ISA allowance from 6 April 2027.
Most popular Stocks and Shares ISA ETFs in 2025
Ready to invest in a Stocks and Shares ISA?
With taxes rising, making sure you’re making the most of your tax-free ISA allowance and investing is a good start.
But to make your money go even further, you need to consider ISA fees too. That’s because high fees can quickly eat into those all-important tax-free returns.
With InvestEngine ISA you don’t pay a penny in withdrawal or platform fees, helping you grow your wealth even quicker. Just remember though, ETFs have their own costs when you invest.
2. Power up your pension
With more of us being dragged into higher tax brackets, you can use this to your advantage by making the most of tax relief.
The government wants to help you save for retirement, so when you put money in your pension, like in a Self-Invested Personal Pension, the government does too.
If you’re a basic-rate taxpayer, you get a 20% government uplift on any money you put into a pension.
Tax relief is particularly useful if you’re a higher earner.
For higher-rate taxpayers, a £20,000 pension contribution actually costs just £12,000. The government pays 20% (£4,000) and you can claim another 20% back in tax relief.
For additional-rate tax payers, the amount you can claim goes to 45%, so a £20,000 contribution costs you even less.
See how much tax relief you could get
Don’t forget about your workplace pension
Make sure you’re maxing out your workplace pension contributions where possible too.
Free money from your employer is too good a deal to pass up, especially when our wallets are being squeezed from higher taxes.
5 most popular pension ETFs in 2025
Ready to invest in a Self-Invested Personal Pension?
The income tax freeze might mean you pay a higher rate than you’re used to, so considering adding money to your pension and making the most of extra tax relief is a no brainer.
So whether you’re a basic-rate, higher-rate or additional-rate taxpayer (or about to become one), pension contributions, like into the InvestEngine Self-Invested Personal Pension, are a powerful way to make the most of the tax tools you have available.
3. Use your other tax-free allowances
Using your ISA and pension allowances are great ways to shelter your money from tax, but there are also other allowances you can use.
The first is your capital gains tax allowance.
This tax year, you can make up to £3,000 of gains outside an ISA and SIPP and pay no capital gains tax on it. However, for any gains over £3,000, you’ll have to pay tax, depending on how much you earn.
Like we mentioned earlier, you also get your personal savings and dividend allowances.
The personal savings allowance lets you earn interest on your savings without paying tax on it. Your allowance depends on how much you earn. Basic-rate taxpayers currently get a personal savings allowance of £1,000, higher-rate taxpayers get £500, while additional-rate taxpayers don’t get any.
The dividend allowance lets you earn up to £500 from dividends each tax year. But you get this no matter how much you earn.
Plan as a couple to pay even less tax
If you have a spouse or civil partner, it makes a lot of sense to plan your finances as a couple, especially if one of you pays less, or no tax at all.
Not only do you both get ISA and SIPP allowances, but you could be making more of other allowances as a couple — for example the personal allowance, personal savings allowance, capital gains and dividend allowances too.
Make sure you’re both using these as best as you can.
And if one of you isn’t using all of yours, then you could think about gifting investments (without worrying about capital gains tax from gifting), so you can shelter more from tax using any allowances you have left.
How to make the most of your tax allowances
Important information
Capital at risk. The value of your investments may go down as well as up, and you may get back less than you invest.
ETF costs apply. If in doubt, you may wish to consult a professional adviser for guidance.
Tax treatment depends on your personal circumstances and may change in future. This article is for general information only and does not constitute financial advice. Scottish tax rules are also different.