UK households are being urged to take immediate action to safeguard their finances amidst growing concerns that Chancellor Rachel Reeves' upcoming Autumn Budget could introduce significant tax increases. The Labour Chancellor has warned that all British taxpayers must "contribute", with strong rumours circulating that she may raise income tax for the first time in five decades.
Why You Need to Act Before November 26
Financial expert Craig Rickman from Interactive Investor emphasises the importance of careful planning. "The key question that anyone would need to ask themselves is: if I make this decision ahead of the Budget and nothing changes on November 26, will it harm my current or future financial security?" he advises.
Fortunately, there are several legitimate strategies available to help reduce your tax liability and retain more of your hard-earned money.
Seven Legal Ways to Reduce Your Tax Bill
Maximise Your ISA Allowance
You can currently invest up to £20,000 annually into Individual Savings Accounts, where all returns remain completely tax-free, whether in cash or stocks and shares accounts. Mr Rickman confirms: "The benefit of using your cash ISA allowance as early as you can is that the interest that you're earning is tax-free. Doing it as soon as you can is pretty much always a good idea."
Boost Your Pension Contributions
Increasing your pension payments provides protection against potential income tax rises while allowing you to benefit from valuable pension perks during your lifetime. Contributions currently receive tax relief at your marginal rate.
Martin Willis of consultancy Barnett Waddingham explains: "Bringing forward planned contributions could lock in current rules around tax relief, contribution limits, or how much you can draw tax-free. But remember, once money is in a pension, it's locked away until at least age 55 [rising to 57 in 2028], so decisions should always reflect your wider financial situation."
Utilise the Marriage Allowance
Married couples can transfer part of their tax-free personal allowance between each other. While everyone receives a £12,570 tax-free allowance, married couples can transfer £1,260 if one partner earns less than £12,570 and the other earns between £12,571 and £50,270 (the basic tax rate). Transferring the maximum amount can generate meaningful tax savings.
Claim Childcare Support
Households can receive up to £2,000 annually from the government to help with childcare costs through the Tax-Free Childcare scheme. You can pay up to £500 every three months into a dedicated account, with the government adding £2 for every £8 you contribute.
Get Cash Back on Work Expenses
You can claim tax relief on various job-related expenses, increasing your take-home pay while reducing your tax bill. Eligible items include working from home costs, uniforms, tools, work clothing, and vehicles used for business purposes. The relief amount depends on your actual spending and your tax rate, though you cannot claim if your employer fully reimburses you.
Consider Salary Sacrifice
Salary sacrifice arrangements allow you to exchange part of your salary for benefits such as company cars, childcare vouchers, or additional pension contributions. Your salary is reduced by the cost of the benefits you select.
Marianna Hunt, personal finance specialist at Fidelity International, notes: "Speculation suggests salary sacrifice could come under review. It's worth remembering, however, that no proposals have been announced and any such move would need careful consideration."
Use Your Trading and Property Allowances
Everyone receives a £1,000 trading allowance for side hustle income from activities like tutoring, crafts, or dog walking, completely tax-free. Similarly, you can earn £1,000 annually from your property through activities such as renting out your driveway or garage without paying any tax.
With the Autumn Budget announcement scheduled for November 26, now is the time to review your financial arrangements and consider implementing these legitimate tax-saving strategies to protect your financial future.
