Income Tax Allowances & Reliefs You Shouldn’t Miss This Year
- Asia Bashir
- Sep 26
- 2 min read
Every new tax year brings updated thresholds, allowances, and reliefs — and staying informed can save you a significant amount of money. Many individuals in the UK end up paying more tax than necessary simply because they don’t take advantage of the allowances available to them.
Here’s a round-up of the key income tax allowances and reliefs you should not miss this year.
1. Personal Allowance
Most individuals are entitled to a tax-free personal allowance. For the 2025/26 tax year, the standard allowance is £12,570. This means you don’t pay any income tax until your income exceeds this threshold.
Tip: If your income is close to £100,000, you could lose your allowance at a rate of £1 for every £2 earned above this level. Careful tax planning can help reduce the impact.
2. Marriage Allowance
If you’re married or in a civil partnership, you may be able to transfer up to £1,260 of your unused personal allowance to your partner — saving up to £252 in tax this year.
This is especially useful if one partner has income below the personal allowance threshold.
3. Dividend Allowance
If you own shares in a company, you benefit from the dividend allowance, which is currently £500. Dividends within this allowance are tax-free, and anything above is taxed at dividend rates (8.75%, 33.75%, or 39.35%, depending on your income band).
4. Personal Savings Allowance
Interest earned on savings can also be tax-free thanks to the Personal Savings Allowance (PSA):
Basic rate taxpayers: up to £1,000 tax-free.
Higher rate taxpayers: up to £500 tax-free.
Additional rate taxpayers: no allowance.
5. ISA Allowance
Every UK resident can save or invest up to £20,000 in an Individual Savings Account (ISA) each tax year, completely tax-free. This includes Cash ISAs, Stocks & Shares ISAs, Innovative Finance ISAs, and Lifetime ISAs.
6. Pension Contributions
Contributing to a pension not only helps secure your future but also reduces your taxable income. For most people, the annual allowance is £60,000 (or 100% of earnings if lower). Contributions receive tax relief at your marginal rate, making this one of the most effective ways to save tax.
7. Gift Aid Donations
Donations to registered charities can be made through Gift Aid, allowing charities to claim an extra 25p for every £1 donated. Higher and additional rate taxpayers can also claim back the difference between their rate and the basic rate.
8. Rent-a-Room Relief
If you rent out a furnished room in your home, you can earn up to £7,500 per year tax-free under the Rent-a-Room Scheme.
Final Thoughts
The UK tax system offers several allowances and reliefs — but they’re only beneficial if you use them. Missing out means paying more tax than you need to.
At A to Z Finance Solutions Ltd, we help individuals and businesses identify opportunities for tax savings, stay compliant with HMRC, and plan effectively for the future.
Contact us today to ensure you’re making the most of the allowances available to you this year.
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