Answers · UK 2025/26
How can I legally reduce my UK tax bill?
Top legal UK tax reductions: pension contributions (full marginal rate relief), ISA (£20,000 tax-free), salary sacrifice (saves Income Tax + NI), Marriage Allowance (£252), gift aid donations, EIS/SEIS investments, and incorporating if self-employed earning over ~£40k.
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Legal UK tax planning routes (2025/26). Pension contributions — full tax relief at your marginal rate; £60,000 Annual Allowance; carry-forward 3 years. Critical for higher earners between £100k–£125k to drop below £100k and reclaim Personal Allowance. ISA — £20,000/year tax-free wrapper; no Income Tax, dividend tax or CGT on returns. Salary sacrifice — bicycle (Cycle to Work), pension, electric vehicle, childcare; saves Income Tax AND NI (up to 42% for higher rate). Marriage Allowance — £252/year if one partner is non-taxpayer. Gift Aid — donating £80 net cost gives charity £100 + higher-rate claim 25% via Self Assessment. EIS/SEIS — 30%/50% Income Tax relief on early-stage investments. Use spouse Personal Allowance — gift income-generating assets to lower-earning spouse (no CGT between spouses). Limited company — if profits >£40k, salary + dividend extraction often saves £3-10k/year vs sole trader. Capital Gains — use £3,000 annual exemption every year (use it or lose it). Bed and ISA — sell shares, immediately rebuy inside ISA. ALWAYS combine with professional advice for complex situations.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.