Last updated: 14 October 2026
How can you make the most of your UK tax allowances?
Use each allowance fully every tax year, as most can’t be carried forward. For 2026/27, that means using your £12,570 Personal Allowance, the £500 dividend allowance, the £1,000 or £500 Personal Savings Allowance, the £3,000 capital gains exempt amount, the £20,000 ISA allowance and pension annual allowance of £60,000. Couples can double many of these by sharing income and assets.
Key allowances for 2026/27
| Allowance | Amount | Notes |
| Personal Allowance | £12,570 | Reduced above £100,000 income |
| Marriage Allowance | £1,260 transfer | Saves up to £252 a year |
| Personal Savings Allowance | £1,000 basic rate, £500 higher, £0 additional | Plus up to £5,000 starting rate for savings |
| Dividend allowance | £500 | Dividends above taxed at 10.75%/35.75%/39.35% |
| CGT annual exempt amount | £3,000 | Per person |
| ISA allowance | £20,000 | Cash ISA limit falls to £12,000 for under-65s from April 2027 |
| Pension annual allowance | £60,000 | Tapered for very high earners |
| Trading and property allowances | £1,000 each | For small side incomes |
| Rent-a-room relief | £7,500 | For letting a room in your home |
| IHT annual exemption | £3,000 | Plus small gifts of £250 per person |
Ways to use them
- Share income with your spouse. Transfer savings or rental property to the lower earner, so they use their allowances and lower bands.
2. Pay into a pension. Contributions get tax relief at your highest rate and can bring income below £100,000.
3. Fill your ISA. Interest, dividends and gains are tax-free.
4. Use the CGT exempt amount. Sell investments with gains of up to £3,000 each year, or “bed and ISA” them.
5. Directors: take a salary up to the Personal Allowance and dividends to use the £500 allowance and basic rate band.
6. Gift Aid: extends your basic rate band and reduces adjusted net income.
Example
Tom and Ella, a married couple, have £60,000 of savings in Tom’s name. Tom is a higher-rate taxpayer with a £500 savings allowance. Ella earns £20,000 and has a £1,000 savings allowance. Moving the savings to Ella, and using both ISA allowances, could take all of their interest out of tax.
Allowances to watch
- The £100,000 to £125,140 band has an effective 60% rate
- The High Income Child Benefit Charge starts at £60,000
- Free childcare stops above £100,000
- Pensions come into IHT from April 2027
Timing
Make use of allowances before 5 April each year. Gifts, ISA payments and pension contributions should be made before the deadline, ideally in plenty of time.
Allowances for business owners
If you run a business, there are more allowances to plan around. The Annual Investment Allowance gives 100% relief on up to £1 million of plant and machinery. Employment Allowance cuts employer NIC by up to £10,500. Sole traders can use the £1,000 trading allowance for very small side businesses instead of claiming expenses. Timing purchases before your year end can bring relief forward by a full year.
Frequently asked questions
Can I carry forward my ISA allowance?
No.
Can I carry forward pension allowance?
Yes, unused allowance from the previous 3 years.
Can my children use their allowances?
Yes, but gifts from parents producing over £100 of income are taxed on the parent.
Does the Personal Allowance apply to dividends?
Yes, if not used by other income.
Related: the pensioners’ tax-free allowance debate, the Marriage Allowance and charitable donations and the Personal Allowance.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with personal tax planning. See our small business accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
