Most UK taxpayers pay more tax than they need to. Not through fraud or grey-area schemes — just because they don't know about the perfectly legal reliefs and allowances available to them. Here are seven that actually work.
Last updated: April 2026 · Written by the EasyCalculators team
This is the single most powerful income tax reducer available to most UK employees — and it's completely legal because the government designed it this way.
Every pound you contribute to a pension reduces your taxable income by £1. If you're a basic-rate (20%) taxpayer, you get 20p back for every £1 you contribute. If you're a higher-rate (40%) taxpayer, you get 40p back — so putting £1,000 into your pension effectively costs you just £600 out of pocket.
With salary sacrifice — where contributions come out of your gross salary before tax and National Insurance are calculated — you save NI as well. On a £40,000 salary, contributing an extra 5% (£2,000) via salary sacrifice saves roughly £880 in tax and NI combined. Your take-home only drops by about £1,120, but your pension gets the full £2,000.
The annual allowance for pension contributions in 2025/26 is £60,000 (or 100% of your earnings, whichever is lower). Higher earners face a tapered allowance once their income exceeds £260,000.
Action: Ask your employer if they offer salary sacrifice. If they do, increasing your pension contribution is almost always the best tax move available to you.
The ISA allowance for 2025/26 is £20,000. Any interest, dividends or capital gains generated inside an ISA are completely tax-free — not just tax-deferred, but exempt forever.
This matters most if you have significant savings. The Personal Savings Allowance lets basic-rate taxpayers earn £1,000 in interest tax-free (£500 for higher-rate payers) but many savers with £30,000+ in regular accounts now exceed this. With savings rates above 4%, a £25,000 cash holding generates £1,000+ in interest — pushing you over the allowance.
Moving savings into a Cash ISA protects all future interest. For long-term investors, a Stocks and Shares ISA shelters dividends and capital gains that would otherwise be taxable.
Note that ISAs do not reduce your Income Tax on employment income — they only protect investment and savings income. But over years, sheltering returns inside an ISA compoundingly reduces your future tax liability.
This is one of the most overlooked reliefs in the UK tax system. If you're married or in a civil partnership and one of you earns below the Personal Allowance (£12,570), the lower earner can transfer 10% of their Personal Allowance — £1,260 — to their partner.
This reduces the higher earner's tax bill by up to £252 per year. Not huge, but it's free money that requires a single online application at HMRC. You can also backdate a claim up to four years, potentially receiving up to £1,008 as a lump sum.
Around 2 million eligible couples don't claim this. The eligibility rules are: one partner must be a non-taxpayer (earning under £12,570) and the other must be a basic-rate taxpayer (earning £12,571–£50,270). Higher-rate taxpayers are not eligible as the recipient.
Action: Apply at gov.uk/apply-marriage-allowance. Takes about 10 minutes.
Around 5 million people in the UK are on the wrong tax code at any given time. If your code is wrong, you could be overpaying — or underpaying and building up a future bill.
The standard code for 2025/26 is 1257L, reflecting the £12,570 Personal Allowance. Common reasons for wrong codes include:
Check your code on your payslip or P60. If it doesn't look right, use the HMRC Income Tax checker at gov.uk/check-income-tax-current-year. If you've overpaid, HMRC will refund it — usually through an adjusted tax code or a cheque.
If your employer requires you to work from home (not just offers it), you may be able to claim tax relief on household costs. HMRC allows a flat-rate relief of £6 per week (£312/year) without needing receipts. A basic-rate taxpayer gets £62.40 back; a higher-rate taxpayer gets £124.80.
If your actual costs are higher, you can claim the real amount with evidence — electricity bills, broadband proportional to work use, etc. For those running a business from home as a sole trader, more extensive home office deductions are available.
Employees can claim online at gov.uk. The process takes about 10 minutes and the relief is applied to your tax code going forward.
Gift Aid lets UK charities reclaim the basic-rate tax on your donation. On a £100 donation, the charity receives £125 (HMRC adds £25). For you as a basic-rate taxpayer, the cost is just £100.
But if you're a higher-rate taxpayer, you can claim an additional 20% back through Self Assessment, making that £100 donation cost just £75 in real terms. The charity still receives £125, but you've personally only given up £75.
This works on any donation to a UK registered charity where you've signed a Gift Aid declaration. If you donate regularly to charities (direct debits, JustGiving, etc.) and are a higher-rate taxpayer, claiming this relief through Self Assessment is worth doing. Many higher earners who donate to charity simply don't know they can claim it back.
This is the most expensive tax trap that affects middle-to-higher earners and relatively few people know about it.
Once your income exceeds £100,000, your Personal Allowance is reduced by £1 for every £2 of income above that threshold. By £125,140, your Personal Allowance is completely gone. This creates an effective marginal tax rate of 60% on income between £100,000 and £125,140.
For example: earning £105,000 instead of £100,000 means you pay:
The fix: if you earn between £100,000 and £125,140, making pension contributions or Gift Aid donations to bring your "adjusted net income" below £100,000 can save you up to £5,028 in tax. This is genuinely one of the most valuable tax planning opportunities available and it's completely legal — it's exactly what the pension system is designed for.