Legal ways to pay less income tax

For 2025-26 returns and the 2026-27 tax year. Checked against GOV.UK, October 2026.

These are ordinary, HMRC-approved ways to pay less tax: allowances and reliefs the law gives you, not schemes. Most people miss at least one. The free calculator works out which ones fit you and what each would save, using your own figures.

1. Pay into a pension

Pension contributions are the biggest tax saver for most people who pay higher-rate tax. For a personal pension (or a workplace scheme that uses "relief at source"), you pay in £80 and the provider claims £20 from HMRC, so £100 goes in. That's the basic-rate relief.

If you pay tax above the basic rate, you claim the rest on your tax return. HMRC widens your basic rate band by the gross amount, so that much income moves from 40% to 20% (or from 45% to 40%).

Example

You earn £60,000. £9,730 of it is taxed at 40%. Paying £7,840 into a personal pension puts £9,800 in your pot and moves all of that £9,730 into the basic rate band. You get £1,960 from the top-up plus £1,946 back on your return: about 40% relief in total.

• You can get relief on up to 100% of your earnings each year (or £3,600 gross if you earn less), within the £60,000 annual allowance.
• Payments count for the tax year you make them, so a payment now counts for 2026-27, not your 2025-26 return.
• Salary sacrifice at work saves National Insurance as well as tax. From April 2029, only the first £2,000 a year of sacrifice will be free of National Insurance.
• You can't take the money out until you're 55 (57 from April 2028), so only pay in what you can lock away.

More: claiming higher-rate pension relief.

2. The £100,000 trap

Above £100,000 of adjusted net income, you lose £1 of Personal Allowance for every £2 over. It's all gone at £125,140. That makes income between those figures taxed at an effective 60%.

Paying into a pension (or giving with Gift Aid) reduces your adjusted net income. Bringing it back down to £100,000 wins back the allowance. On £110,000, a £10,000 gross pension contribution (£8,000 from you) cuts the bill by £4,000 on top of the £2,000 top-up: 60% relief.

3. The Child Benefit charge

If you or your partner get Child Benefit and the higher earner's adjusted net income is over £60,000, the High Income Child Benefit Charge takes back 1% of it for every £200 over. It's all taken back at £80,000. Pension contributions and Gift Aid bring adjusted net income down and reduce the charge.

If your income is over £80,000 you may still want to claim Child Benefit and opt out of the payments: it protects the National Insurance credits of a parent who stays at home.

4. Gift Aid, and carrying it back

With Gift Aid, the charity claims 25p for every £1 you give. If you pay higher-rate tax, you claim the difference on your return: on a £100 gift (£125 to the charity) that's £25 back at 40%.

Carry-back: gifts you make after the tax year ends can be treated as if made in that year, as long as you make them before you file the return, and by 31 January. So giving now and claiming it on your 2025-26 return gets you the relief sooner, and at last year's rates. Use it if your income was higher last year.

5. Marriage Allowance

If you're married or in a civil partnership, and one of you earns less than £12,570 while the other pays basic-rate tax (intermediate rate in Scotland), the lower earner can transfer £1,260 of their Personal Allowance. It saves up to £252 a year. You can backdate it for up to 4 earlier tax years if you both qualified, so a first claim can be worth over £1,000.

It doesn't work if the higher earner pays higher-rate tax. Apply on GOV.UK.

6. Share income with your spouse

Each of you has your own Personal Allowance, savings allowance, dividend allowance and £3,000 tax-free amount for gains. Gifts between spouses and civil partners are free of Capital Gains Tax. So holding savings, shares or a let property in the name of the one who pays less tax can cut what you pay together. It has to be a real gift: the money or share becomes theirs.

7. ISAs for savings and shares

Interest and dividends in an ISA are tax-free, and so are gains when you sell. You can put up to £20,000 a year in. Outside an ISA:

• the Personal Savings Allowance covers £1,000 of interest for basic-rate taxpayers and £500 for higher-rate (none at the additional rate)
• the dividend allowance is £500
• from April 2027 savings interest above the allowances is taxed at 24%, 44% or 49% (Budget 2026), so sheltering it is worth more

"Bed and ISA" means selling shares and buying them back inside an ISA, using your tax-free amount for gains as you go.

8. Capital gains

• Everyone gets £3,000 of gains tax-free each tax year. Spreading sales over two tax years uses two.
• Giving assets to your spouse before selling uses their £3,000 and maybe their lower rate.
• Losses can be set against gains. Report them within 4 years, even in a year you don't need them, so you can carry them forward.
• Your main home is usually free of tax (Private Residence Relief), and selling a business or shares in your own company may get Business Asset Disposal Relief at 14% (18% from April 2026).

More: Capital Gains Tax on your return.

9. Expenses for your job

Employees can claim for things the employer doesn't pay back: a flat amount for uniforms and tools (£60 to £140 a year with no receipts), 45p a mile for business journeys in your own car (55p from April 2026), and professional fees and subscriptions on HMRC's approved list. Claims can go back 4 years. More: job expenses.

10. Business costs and equipment

If you're self-employed, every allowable cost comes off your profit, saving tax and National Insurance (20% plus 6% for a basic-rate taxpayer). People often forget:

• a share of phone, broadband and energy, or HMRC's flat home-working allowance (£10 to £26 a month)
• business mileage at 45p a mile instead of actual car costs, if simpler
• equipment, tools, machinery and vans: the Annual Investment Allowance takes the full cost off your profit in the year you buy
• training to keep your skills up to date, accountancy fees, bank charges and insurance

Buy things because the business needs them: spending £1,000 to save £260 still costs you £740. More: what you can claim.

11. The £1,000 allowances and Rent a Room

The trading allowance and property allowance each let you earn £1,000 a year tax-free, or take £1,000 off your income instead of actual costs. The trading allowance rises to £3,000 from April 2027. Letting a furnished room in your own home is tax-free up to £7,500 a year under Rent a Room. The calculator picks whichever way is cheaper for you.

12. Landlords

• Claim every allowable cost: letting agent and management fees, repairs (not improvements), insurance, ground rent, service charges, safety certificates and replacing furnishings.
• Mortgage interest on homes you let gets a 20% tax reduction. Unused amounts carry forward, so record them every year.
• Joint property with a spouse is taxed 50:50 unless you own it unequally and send Form 17. Owning more of it in the name of the lower earner can cut your joint bill.
• Losses from one year carry forward against future rental profits.

Sources

• GOV.UK: Tax relief on pension contributions
• GOV.UK: Income over £100,000
• GOV.UK: High Income Child Benefit Charge
• GOV.UK: Gift Aid and HMRC Self Assessment manual (Gift Aid carry-back)
• GOV.UK: Marriage Allowance
• GOV.UK: Individual Savings Accounts
• GOV.UK: Capital Gains Tax
• GOV.UK: Annual Investment Allowance

General guidance, not financial or tax advice. Your own situation may differ. For big decisions, speak to a regulated financial adviser or a qualified accountant.