The best ways to save on taxes for the 2025/26 tax year

Tax season can feel overwhelming for many businesses and individuals, it’s a lot to navigate. However, with the right planning and strategies, it’s possible to reduce your tax liability and keep more of your hard-earned money. At Future Cloud, we’ve helped many clients optimise their tax savings. Below, we share some effective ways to save on taxes, both for businesses and individuals.

One of the simplest ways to save on taxes is by making the most of available allowances and reliefs. The UK tax system offers several benefits to taxpayers who know where to look. Here are a few key ones:

• Personal Allowance – For individuals, the personal allowance allows you to earn up to a certain amount before paying any tax. The standard personal allowance is £12,570 (2025/2026), but it decreases if your income is over £100,000. It’s important to plan your income and any potential deductions to ensure you’re making full use of this allowance.
• Marriage Allowance – If you’re married or in a civil partnership, you can transfer part of your personal allowance to your partner, potentially saving them up to £252 a year. This is a great option if one of you earns less than the personal allowance.
• Capital Gains Tax Exemption – Each individual has an annual exemption for capital gains, meaning you can sell assets up to a certain value without being taxed. For the 2025/2026 tax year, this exemption is £3,000, so it’s worth considering the timing of any asset sales to optimise your tax liability.
• Income Tax Bands and Rates – Knowing which tax band you fall into is key. Taxable income between £12,571 and £50,270 is taxed at 20%, with higher rates for earnings above this threshold. If you’re near a threshold, structuring your income appropriately can reduce your overall tax burden.

Pensions aren’t just for retirement, they’re also a great way to reduce your taxable income now. Here’s how contributing to a pension scheme can save you tax:

• Personal Pension Contributions – Contributions to a personal pension can reduce your income tax bill. The more you contribute, the less taxable income you have. This could be especially beneficial if you’re close to reaching a higher tax band.

• Employer Pension Contributions – If you’re an employee, your employer may also contribute to your pension scheme. These contributions are not subject to National Insurance, and you won’t pay income tax on them, making them an effective way to boost your retirement savings.
• Annual Allowance – The maximum amount you can contribute to a pension and receive tax relief is £60,000 (2025/2026). Contributions above this limit will be subject to tax, so it’s important to stay within the allowance.

For businesses, whether you’re a sole trader or limited company, there are numerous business expenses you can claim back to reduce your taxable profits. Some common examples include:

• Office Equipment and Supplies – From computers and desks to office stationery, many business-related purchases can be deducted from your taxable income.
• Travel and Subsistence – If your business requires travel, you can deduct expenses such as fuel, public transport, hotel stays, and meals.
• Home Office Expenses – If you work from home, you can claim a portion of your household costs as business expenses. This can include a percentage of your rent or mortgage, utilities, phone bills, and internet.
• Training and Professional Development – Courses, certifications, and training related to your business can often be claimed as tax-deductible expenses.
• Marketing and Advertising – Any costs related to promoting your business, such as advertising or website development, can be deducted from your taxable profits.

Make sure to keep detailed records of all your business expenses to ensure you’re maximising your deductions.

For businesses investing in assets such as equipment, machinery, or vehicles, the Annual Investment Allowance (AIA)is a fantastic opportunity for you. The AIA allows businesses to claim 100% tax relief on qualifying purchases, up to a limit of £1,000,000.

If you’re planning a significant purchase for your business, consider timing it towards the end of the tax year, so you can immediately offset the cost against your profits and reduce your tax bill.

For individuals, charitable donations made under Gift Aid can also reduce your taxable income. If you’re a taxpayer, donating to charity through Gift Aid allows the charity to claim back 25p for every £1 you donate at no extra cost to you. Plus, you can also claim tax relief on the donations by extending the benefit to your income tax return. It’s a win-win for both you and the charity!

ISAs (Individual Savings Accounts) are one of the most tax-efficient ways to invest and save in the UK. You can contribute up to £20,000 (2025/2026) into an ISA, and any interest, dividends, or capital gains you earn are tax-free. It’s a smart way to grow your savings without the worry of extra tax charges.

For sole traders, one way to save on taxes is by incorporating your business into a limited company. Operating as a limited company may offer tax advantages over being a sole trader, particularly if you’re a high earner.

• Corporate Tax Rate – The corporate tax rate in the UK is 19% for profits under £50,000. This is often lower than the income tax rates for sole traders, so incorporating could save you a significant amount of tax.
• Dividends vs Salary – As a company director, you can pay yourself a combination of salary and dividends. Dividends are often taxed at a lower rate than salary, so this can be an effective way to reduce your overall tax liability.

So, do you want to save some serious cash? Saving on taxes is about smart planning, understanding the allowances and reliefs available to you, and taking advantage of tax-efficient strategies. See if our tips help you!

At Future Cloud, we specialise in helping individuals and businesses maximise their tax savings while ensuring full compliance with UK tax laws.

Want to learn more? Get in touch with us today, we’re here to help!

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