41 simple ways to pay less tax

Nobody wants to pay more tax than they need to, but the problem is that the tax system is incredibly complicated. In this guide, we tell you 41 ways in which you can slash your tax bill covering everything from income tax, National Insurance, Capital Gains tax, Inheritance tax, Council tax and even how to legally avoid paying for a TV licence.

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1. Use your annual ISA allowance -­ Each tax year, you can shelter cash and investments within an ISA to minimise your income tax and capital gains tax (CGT) bills. The current ISA limit is £20,000 and you can choose between a number of different types of ISA including a cash ISA, a Stocks & Shares ISA, an innovative finance ISA, a Lifetime ISA, or you can invest in a mixture of all of them. You don’t pay any tax on the interest, dividends, or profits from investments held within an ISA. The rules have changed in recent years, meaning you can now invest in more than one of each ISA type. Check out our article 'Can I invest in more than one ISA' for more information. As a reminder, ISAs are not exempt from inheritance tax (IHT).
2. Check your personal savings allowance (and the lesser-known ‘starting savings rate allowance’) - Each year, you can earn up to £1,000 in interest on your savings without having to pay tax on it. The allowance is reduced to £500 for higher rate taxpayers and is reduced to zero for those earners that are in the highest tax bracket (known as the 'additional rate'). The starting savings rate allowance was introduced in April 2015 and is designed to ensure that low earners pay less tax on their savings. Depending on your earnings, the starting savings rate allows you to earn up to £5,000 per year in interest without paying any tax, plus you then get the personal savings allowance added on top (£1,000 for basic rate taxpayers and £500 for higher rate taxpayers). For more information, see our article "What is the personal savings allowance and how you can boost it by £5,000".
3. Put savings in a non ­tax-paying spouse's name -­ If your spouse is a non ­income tax-payer and you are an income tax-payer, it makes sense to hold any money on deposit in a bank account in his/her sole name. Obviously, once the savings are in their name, they have sole control of the money - so make sure you don't fall out.
4. Check your tax code - If you receive an income via PAYE (pay as you earn), be it earned or from a pension, then check your tax code. Your PAYE code determines how much tax you pay. It is down to you to make sure that you are on the correct code, otherwise you could be paying too much tax. Recent research suggested that as many as 1 in 3 people could be on the wrong tax code. The real problems start to arise if you have more than one job. If you do, then read our article "Two jobs? Avoid this tax trap".
5. Make sure your spouse uses his/her ISA allowance otherwise he/she will lose it - There's nothing to stop you moving cash into his/her name so that they can fund it, sheltering more of your money from HMRC.
6. Equalise income between you and your spouse -­ If your spouse pays lower or indeed no income tax, move income-producing assets (not just bank accounts – as mentioned above) into their name. The income will then form part of their tax assessment which could reduce your overall household tax bill. It will ensure that your spouse’s personal annual tax free allowance is used and any tax due is charged at a lower rate.
7. Consider joining employer share schemes – These schemes will reduce your taxable income, in exchange for shares under the scheme rules, and you will only be liable to CGT when you decide to sell the shares. We explain more about sharesave schemes in episode 360 of the Money to the Masses podcast.
8. If you continue to work after the state retirement age, make sure you stop paying National Insurance.
9. Consider generating capital gains rather than income – Particularly when looking at your investments. Following the Autumn 2024 Budget, Capital Gains Tax (CGT) rates were increased and aligned. The rate is now a flat 18% for basic-rate taxpayers and 24% for higher-rate taxpayers across all assets (including both shares and property). Despite the hike, generating capital gains is often still more tax-efficient than generating income, as income tax rates can climb up to 45% (or even an effective 60% for those caught in the £100k tax trap)..
10. If you are self-employed make sure you claim tax relief on the cost of running any car used for business purposes - For more information, read the government advice in "Simplified expenses if you're self-employed".
11. Use your dividend allowance - If you are a shareholder in a limited company, then make sure you use your dividend allowance. The dividend allowance currently allows you to earn up to £500 free of tax.
12. Employ your spouse ­- Employing family members, such as a wife, is a simple way for business owners to save tax,­ in particular those business owners whose spouse has no other sources of income in their own right. However, you can’t just pretend that your spouse works for you, they must contribute to the business and the level of salary you pay must be commercially justifiable. As long as you can tick those boxes, plus you pay your spouse above the minimum wage, you can deduct their pay as an allowable expense from your business profits and they pay minimal tax on their income.
13. Marriage allowance - Marriage allowance lets you transfer up to £1,260 of your personal allowance to your spouse if they earn more than you, which could reduce your tax bill by up to £252. For more information, read our article "What is Marriage Allowance and how can you claim it?"
14. Claim expenses -­ If you are self-employed, make sure you are claiming all your tax-deductible expenses.
15. Make pension contributions – These can reduce your tax bill while at the same time helping you save for your retirement. Pension contributions receive tax relief at your highest marginal income tax rate subject to an annual limit of the lower of 100% of your earnings or £60,000.
16. Escape the 60% £100,000 'Tax Trap' - When your income tops £100,000, your tax-free Personal Allowance (£12,570) is reduced by £1 for every £2 you earn above that limit. This creates a punishing effective marginal tax rate of 60% on earnings between £100,000 and £125,140. The smartest way to avoid this trap is to use salary sacrifice or make personal pension contributions to bring your taxable income back down below the £100,000 mark, restoring your allowance and securing 60% tax relief on the contribution.
17. Avoid the High Income Child Benefit Charge (HICBC) - If you or your partner earn over £60,000, you start losing your Child Benefit, and it is wiped out completely if one of you earns over £80,000. However, the charge is based on your adjusted net income. By making pension contributions, you can lower your adjusted income below these thresholds, effectively reclaiming your Child Benefit while simultaneously boosting your retirement pot.
18. Make pension contributions on behalf of your spouse and children via stakeholder pension – You can invest up to £3,600 a year into stakeholder pensions for each of them, even if your spouse and children do not earn anything. Since basic ­rate tax relief is available, each contribution of £3,600 will cost a high earner only £2,880.
19. Consider tax incentivised investments such as Enterprise Investment Schemes (EIS’s) and Venture Capital Trusts (VCT’s) - These offer generous tax breaks upon investment but are very high risk. Other investments you may consider are zero­-dividend preference shares as they do not provide dividend income but instead roll up to an eventual capital gain, hopefully. But a word of warning, never make an investment for tax reasons alone.
20. Use your annual Capital Gains Tax (CGT) allowance - The really good news is that everyone gets an annual CGT allowance each tax year, currently £3,000. This means that you can make capital gains of £3,000 without having to pay tax at all. For investors this is very attractive, again, particularly for high rate income tax.
21. Transfer assets to your spouse (husband, wife, or civil partner) and use their CGT allowance ­- Transfers between spouses are not taxed, and you both get an annual CGT allowance. This means you can transfer enough of your assets to your husband or wife for him or her to sell to use up their own allowance. This effectively doubles the CGT allowance for married couples.
22. Bed­-and-­spousing -­ In the old days you could sell shares on which you’d made a gain to use up some of your CGT allowance, and then the very next day you’d buy back shares in the same company. This was called bed-and-breakfasting, but it is no longer possible. Under current legislation, you can’t buy back the same shares you sold within 30 days if you want to crystallise a capital gain. However, your spouse can buy shares in the company you sold. So what you can do is you sell an investment to realise the capital gain – taking into account your annual allowance, of course – and then your partner repurchases the same assets in their own trading account. This way you keep the assets in the family, essentially keeping your investment portfolio intact, but you’ve defused the gain. Bed­ and ­ISA­ing is the same idea as bed­-and­-spousing, but this time you re­buy within an ISA. Purchasing back the same assets in an ISA doesn’t violate the 30­-day rule.
23. Remember to carry forward any past capital losses -­ If you make an overall capital loss in a tax year, you should note it on your Self Assessment tax return. Importantly, capital losses which you have declared can be carried forward after they were incurred and used to reduce your capital gains in future tax years, as long as the losses were reported within four years of them arising. By carrying forward capital losses indefinitely you can reduce a future CGT bill. If a capital loss was made before 5th April 1996 the four-year rule doesn't apply.
24. Sell your second home tax-free like an MP ­- When you sell your main home, you typically do not have to pay CGT under what is known as Private Residence Relief. What the MPs did was use the rules to their advantage to apply it to their second homes. It is not illegal and you can do it. The final 9 months of your ownership of a property always qualify for CGT relief, regardless of how the property was used during that time (e.g. renting or residential). As long as the dwelling has been your only or main residence at some point in the past you qualify for tax relief. In our article, 10 best ways to avoid inheritance tax I explain how to slash your IHT bill.
25. Make a will -­ If you die without making a will, you will be deemed to have died ‘intestate’ and your estate is distributed in accordance with the law of the land, which is unlikely to be how you would have wished. There are a number of other reasons to make a will such as it may be possible to reduce the amount of tax payable on the inheritance (IHT) if advice is taken in advance and a will is made.
26. Get married ­- Any assets passed between spouses (including those under civil partnerships) are free from IHT. The other benefit of getting married is that IHT is not payable when an estate passes between a husband and wife, or from one civil partner to another. Even better, married couples or civil partners can transfer any unused element of their IHT­-free allowance to their spouse when they die. That means that a married couple’s assets can reach £650,000 before any IHT is payable.
27. Make use of the main residence nil-rate band ­- The main residence nil-rate band is a property allowance that allows you to leave your home to your direct descendants tax-free. It currently stands at £175,000, and following recent government budgets, it will remain frozen at this level until April 2030. This means that a married couple or those in a civil partnership are still able to pass on a total estate of £1 million free of inheritance tax (combining two £325,000 standard allowances and two £175,000 property allowances).
28. Pass on unwanted inheritance -­ It is possible to divert on an unwanted inheritance to someone else by applying for a deed of variation', which will mean the gift can go to another nominated person and not ever form part of the original beneficiary estate. The variation has to happen within two years of the original donor’s death for it to be valid. But speak to your financial adviser and solicitor first.
29. Make use of your annual IHT exemption ­- You can give away gifts worth up to £3,000 in each tax year and these gifts will be exempt from IHT when you die. You can carry forward any unused part of the £3,000 exemption to the following year, but if you don’t use it in that year, the carried­-over exemption expires. This annual exemption is in addition to the other gift exemptions.
30. Gift money when an intended beneficiary is getting married -­ Some gifts made during your lifetime are exempt from Inheritance Tax because of the type of gift or the reason for making it. Wedding gifts are exempt, subject to certain limits.
31. Make small gifts -­ You can make small gifts up to the value of £250 to as many people as you like in any one tax year. However, you can’t give a larger sum and claim an exemption for the first £250. You can’t use your small gifts allowance together with any other exemption when giving to the same person.
32. Give to political parties or charities – No IHT is payable on gifts to charities and political parties. This includes museums, community amateur sports clubs and universities.
33. Gift money out of regular income - ­You can gift away as much as you wish from your regular income as long as your standard of living is maintained. But beware as ‘income’ does not include that from investment bonds.
34. Simply give away your assets ­- Directly giving away your assets is known as a potentially­-exempt transfer (PET). These gifts will not be included in your estate, and so will be free of IHT, as long as you live for 7 years from the date of making the gift.
35. Consider investments that attract IHT relief (but beware of new April 2026 rules) -­ Historically, investments like AIM-listed stocks, forestry, and unquoted businesses attracted 100% Business Property Relief (BPR) or Agricultural Property Relief (APR). But from 6th April 2026, 100% relief on APR and BPR will be capped at a combined £1m, with only 50% relief available above that threshold. Crucially, AIM shares are losing their 100% IHT exemption entirely; they will only receive 50% relief going forward (resulting in an effective IHT rate of 20%). Seek urgent financial advice if you hold these volatile assets, as the tax landscape for them has fundamentally changed
36. Take out insurance – It is unlikely that you will mitigate an entire IHT liability, in which case a simple solution is to take out life insurance (see our article 'Life insurance and Inheritance Tax').
37. Do you need to pay for a TV licence? - A colour TV licence currently costs £174.50, but is rising to £180 a year on 1st April 2026. It is required if you intend to watch or record TV programmes while they are being broadcast live (on any channel). The rules apply even if you don’t own a TV, but watch shows live on any other device, such as a PC, tablet, or phone. You will also need a licence to watch any BBC programmes on catch-up via iPlayer. If, however, you do not watch any live TV and only access your programmes via non-BBC streaming services (like Netflix or Disney+), you do not require a TV licence. Think carefully about your viewing before committing to cancelling, as you may be liable for a fine of up to £1,000 if caught. If you're sure you no longer need one, you can formally declare this on the TV Licensing website.
38. Check you are in the right valuation band – Your Council Tax bill is based on the value of your property. But when we say 'value' it is the value that your local council have assessed your property to be worth. When Council Tax was introduced in the early 90's properties were placed in 'valuation bands' which were established from nothing more than fleeting external glances of properties. Many properties have never been revalued subsequently. So you might not only be in the wrong valuation band and paying too much tax but you could even be paying more than your neighbours. Fortunately, it is possible to challenge your council tax band and potentially save thousands of pounds if you think your band is wrong. But be warned, get your assessment wrong and you could equally be in too low a band in which case an appeal might get your band revalued upwards, as well as those of your neighbours.
39. Get a council tax discount – Certain groups of people (such as those listed below) don't pay Council Tax. So if you live with anyone falling into any of these groups you can claim a discount as the full Council Tax bill is based on at least two adults (who are not part of any exempt groups) living at your address. If only one adult lives in your home, ignoring those exempt people, your Council Tax bill can be reduced by 25%. Exempt people include:
    • children under 18
    • people on apprentice schemes
    • 18 and 19 ­year ­olds who are in full ­time education
    • full­ time college and university students. For houses that contain full­ time students only, the bill will be reduced by 100 per cent.
    • young people under 25 who are receive funding from the Education and Skills Funding Agency; a student nurse or a foreign language assistant registered with the British Council
    • people who have a severe mental disability, live­-in carers who look after someone who isn't their partner, spouse or child (up to 18 years)
    • diplomats

    See our article 'What to do if you are struggling to pay your council tax' 

40. Apply for a Council Tax Reduction – People on low income or receiving benefits may be able to apply for a Council Tax Reduction.
41. Seek advice from a financial adviser and a tax specialist – If you are contemplating mitigating tax, you should seek expert advice as not all the ideas in this guide are suitable for everyone (they are for information purposes only). Also, remember that the tax regime is always subject to change so bear this in mind before you start making wholesale changes to your finances. Read our article 'Do you need financial advice?' for more information.

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