Tax planning: what is legitimate, the 2026 to 2027 allowances and when advice pays

Tax planning is the lawful organisation of your income, savings, spending and ownership so that you pay no more tax than the rules require. It is forward-looking: most of the useful decisions have to be taken before 5 April, before a company year ends, or before an asset is sold. Once the deadline has passed, an adviser can usually only report what happened.

Where does tax planning end and tax avoidance begin?

HMRC gives two short definitions. In its guidance on avoidance, it says tax avoidance involves bending the rules of the tax system to try to gain a tax advantage that Parliament never intended. Its internal manual puts the contrast the other way round: tax planning involves using tax reliefs for the purpose for which they were intended, and the examples it gives are saving in an ISA and making pension contributions.

The practical test is whether the arrangement does something real. Moving savings into an ISA changes where your money sits and is exactly what the relief is for. A scheme built from steps that exist only to generate a tax saving, and that you would never have taken otherwise, is the pattern HMRC describes as contrived and artificial. HMRC says it does not approve tax avoidance schemes, and that people who use them can end up paying much more than the tax they tried to avoid, including penalties.

What are the main tax allowances for 2026 to 2027?

These are the allowances most clients meet. All figures for the tax year 6 April 2026 to 5 April 2027 were checked on GOV.UK on 13 October 2026, apart from the pension figure, which is explained in the note under the table. Scottish taxpayers have different Income Tax bands, which GOV.UK publishes separately.

None of these is a trick. The allowances exist, and anyone can use them. What planning adds is timing and sequence, and the table shows why: an allowance that is not used in the year is normally lost, and only the pension allowance has a carry-forward route.

Who gets the most from planning?

Planning pays most where income or gains sit near a threshold, or where there is a choice about how money is taken. Four situations come up repeatedly.

Income between £100,000 and £125,140

Because the Personal Allowance falls by £1 for every £2 over £100,000, each extra pound in that band is taxed at the 40% higher rate and also uses up allowance. On GOV.UK's figures that works out at an effective 60% rate on the slice, which is why pension contributions or other ways of lowering adjusted net income are often discussed here.

Company directors choosing between salary and dividends

A director can usually choose how to take profit out. With a dividend allowance of only £500, and dividend rates of 10.75%, 35.75% and 39.35% above it, the mix of salary, dividends and employer pension contributions deserves a calculation each year. Our comparison of sole trader or limited company works through examples at several profit levels, and the limited company accounts guide explains the filing side.

Selling shares, a second property or a business

With a Capital Gains Tax annual exempt amount of just £3,000, many disposals produce a taxable gain. Spreading a sale across two tax years, or between spouses and civil partners where ownership genuinely allows it, can bring a second allowance into play. That only works if the ownership is real, which is a point to confirm with an adviser before you act.

Families building savings and retirement income

The ISA and pension allowances are the simplest planning tools, and HMRC itself cites both as legitimate. The decision is rarely whether to use them but in which order, and how much to keep accessible. Death and inheritance planning is a separate field, and our post on an accountant for probate and inheritance tax covers what that involves.

When is an accountant or tax adviser worth paying for?

Advice is worth buying when the sum at stake is larger than the fee, and when a mistake is hard to undo. That usually means a business sale, a large gain, a change from sole trader to company, income near £100,000, a significant inheritance, or any arrangement involving more than one country. For a salaried employee with a stable income and an ISA, a free guide and the HMRC allowances page are often enough.

Look at the qualification, not just the job title. The Chartered Institute of Taxation (CIOT) awards the Chartered Tax Adviser designation, and the Association of Taxation Technicians (ATT), its sister body, awards the Taxation Technician title. Both are tax-specific. An ICAEW, ACCA or CIMA accountant may also give tax advice as part of a wider practice. The most useful thing is that the person is qualified in the area you need and is bound by a professional body that can discipline them.

How do you check that a tax adviser is registered?

1. Ask for their professional body and membership status, and note whether they are a member or fellow.
2. Search the body's own public directory: the ATT's site has a find-a-member tool, and ICAEW, ACCA, CIMA, AAT and CIOT publish their own registers.
3. Match the name and firm on the register to the person who is proposing to advise you.
4. Ask who supervises the firm for anti-money laundering purposes.
5. Be cautious of anyone who cannot be found on a register or declines to say where they are registered.

Firms are matched to the relevant register before they are listed here. You can find an accountant by city, or read our guides for the other services you may need. If part of the planning involves records going back to your books, the bookkeeping guide explains how long they must be kept.

What should you ask a tax adviser before hiring them?

• Which tax year and which taxes does the advice cover, and what is excluded?
• Will the advice be in a written report, and will it set out the risks as well as the saving?
• Is the fee fixed in writing, and what happens if the work grows?
• Does the plan use reliefs for their intended purpose, or a marketed scheme with a reference number?
• What do you need to do, and by when, to put the plan into effect?
• Who is responsible if HMRC questions the position later?

Fees depend on the complexity of your affairs, so do not expect a sensible figure without a conversation. Ask for a written fixed quote that describes the work, and treat a very low price for a very large promised saving with suspicion.