Written by the TaxTune Editorial Team · Reviewed by our qualified accountants · Updated for 2026
The quick answer You reduce tax legally by using your allowances, claiming every expense, paying into a pension, using ISAs, structuring income as a salary and dividend mix where you run a company, and timing income and gains across tax years. None of this is avoidance; it is simply using the reliefs the rules provide.

Legitimate ways to pay less

  1. Use your allowances. The personal allowance, dividend allowance, savings allowance and £3,000 capital gains exemption all reduce tax if used.
  2. Pay into a pension. Contributions get tax relief and can pull higher earners back below key thresholds.
  3. Use ISAs. Income and gains inside an ISA are tax free, sheltering your savings and investments.
  4. Structure company income. A salary and dividend mix is usually more efficient than a full salary for directors.
  5. Claim every expense. Allowable business costs and capital allowances directly reduce taxable profit.
  6. Time it. Spreading income or gains across two tax years can use two years of allowances and bands.

The line between planning and avoidance

Everything here uses reliefs Parliament intended. That is very different from artificial schemes, which HMRC challenges and which can leave you worse off. Good planning is simply making full, sensible use of the rules, and it is what a good accountant does year round.

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Frequently asked questions

How can I legally pay less tax?

Use your allowances, claim every expense, pay into a pension, use ISAs, structure company income as a salary and dividend mix, and time income and gains across tax years. These use reliefs the rules provide.

Is tax planning legal?

Yes. Using the allowances and reliefs Parliament intended is legitimate tax planning. It is different from artificial avoidance schemes, which HMRC challenges and which can backfire.

Do pension contributions reduce tax?

Yes. Contributions receive tax relief and can bring higher earners back below thresholds such as the point where the personal allowance is withdrawn, saving tax at a high effective rate.

How do ISAs save tax?

Income and gains within an ISA are free of income tax and capital gains tax, so using your annual ISA allowance shelters savings and investments from future tax.

Should I take a salary or dividends?

For company directors, a mix of a small salary and dividends is usually more efficient than a full salary, because dividends carry no National Insurance. The best split depends on your profit and income.