5 tax allowances to make your savings and investments more tax-efficient in 2026/27

The 2026/27 tax year started on 6 April, which means various tax allowances and exemptions have reset. Using these tax breaks could help you pay less tax on your income, savings, and investments.

Here are five allowances and exemptions that could make your savings and investments more tax-efficient.

1. ISA allowance

Individual Savings Accounts (or ISAs) are a tax-efficient way to save or invest. You’ll pay no tax on interest, investment returns, or dividends you receive on savings held in an ISA.

They can also be useful for producing a tax-efficient income in retirement as you’ll face no Income Tax on your withdrawals.

You can contribute up to the ISA allowance each tax year. This is £20,000 in 2026/27, and this is the total across all ISAs you have open, not per ISA.

There are four main types of ISA for adults:

• Cash ISA - hold savings and receive tax-free interest. There are easy access and fixed-term accounts available.
• Stocks and Shares ISA - invest in shares, funds, bonds, and more. You’ll pay no tax on interest, returns, or dividends you receive.
• Lifetime ISA (LISA) - available for 18 to 39-year-olds saving for a first home or towards retirement. You can save through a Cash LISA or invest through a Stocks and Shares LISA, with tax-free interest and investment returns. Contribute up to £4,000 a year (which counts towards your total ISA allowance) and receive a 25% government top up. Bear in mind that withdrawals before age 60 that aren’t for buying a first home or in the event of terminal illness will incur a 25% charge.
• Innovative Finance ISA - lend money peer-to-peer and pay no tax on interest payments from your borrower. These are complex accounts and tend to only be suitable for experienced investors.

You can open more than one of each type of ISA in a single tax year. The exception to this is LISA, where you can only pay into and receive the government bonus on one each tax year.

As well as the main ISA allowance, you can also contribute to Junior ISAs (JISAs) for a child under 18 years old. 

In 2026/27, you can contribute up to £9,000 each tax year in an account in your child’s name. You can choose between Cash and Stocks and Shares JISAs, and you can open both in a single tax year, dividing the £9,000 JISA allowance between them.

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2. Personal Savings Allowance

Interest you receive on savings and bonds outside of ISAs is potentially taxable. But before you face a charge, you have a tax-free Personal Savings Allowance. How much tax-free interest you can receive depends on your Income Tax band:

• £1,000 for basic rate taxpayers;
• £500 for higher rate taxpayers; and
• £0 for additional rate taxpayers.

It can be sensible to try and make sure your savings are as tax-efficient as possible. For example, interest earned on ISA savings or in your pension is tax-free. So, making the most of these sources could be sensible.

3. Capital Gains Tax annual exemption

Capital Gains Tax (CGT) is potentially payable when you sell an asset that’s increased in value. The tax is only on the gain, not the total value of the asset.

Before CGT is due, you have an annual exempt amount (£3,000 in 2026/27). You can make gains without paying tax up to this threshold. You can’t carry unused CGT exemption to a new tax year.

If you have to pay CGT, the rate of tax you’ll face will depend on your Income Tax rate:

• 18% for basic rate taxpayers; or
• 24% for higher and additional rate taxpayers.

Here’s how it works.

Imagine that you bought shares for £6,000 and then sold them a year later for £8,500. As the gain is only £2,500, it would be covered under your exemption and therefore be tax-free. 

But, if those shares had risen to £10,000, it would be a £4,000 gain, making £1,000 of it taxable. That’s a £180 tax bill for basic rate taxpayers, or £240 for anyone else.

You can make the most of your exemption by timing your asset sales around the tax year. For example, you could sell half of your shares for £4,250 in the 2026/27 tax year, marking a £2,000 gain. That would be tax-free.

Then, you could wait until 6 April 2027 when the 2027/28 tax year starts before you sell the other half tax-free under your exemption in the new tax year.

4. Dividend allowance

Dividends are added to your total income and then face a different rate of tax to Income Tax. However, before you pay tax on them, you have a tax-free dividend allowance. 

In 2026/27, you can earn up to £500 in dividends before tax is due. That includes dividends on investments held outside of your pension or ISA, and any you receive from a business you own.

Building a portfolio that receives dividends up to this amount could help you create an extra tax-free income stream. Likewise, it can be helpful for tax-efficiently extracting wealth from your company if you’re a business owner.

If you receive dividends above the allowance, you’ll face tax of:

• 10.75% if you’re a basic rate taxpayer;
• 35.75% if you’re a higher rate taxpayer; and
• 39.35% if you’re an additional rate taxpayer.

It’s worth noting that the basic and higher rates have increased by two percentage points for 2026/27. Even so, these rates are still more tax-efficient than those on income.

5. Inheritance Tax annual exemptions

If you want your loved ones to be able to benefit most from your wealth, you may want to consider gifting now to mitigate Inheritance Tax (IHT).

Each tax year, you can make gifts that immediately fall outside of your estate for IHT purposes. 

For example, you can make gifts up to the annual gifting exemption (£3,000 in 2026/27). There’ll be no IHT to pay on this wealth at all.

You can carry forward the exemption for one tax year, and you can combine it with a partner too. So, you could gift up to £12,000 this year if neither of you have used any of your exemption from this or the previous tax year.

You can also make unlimited small gifts of up to £250 per person each tax year. You can’t make a small gift to someone you’ve made a gift to under the annual exemption.

These may be small amounts, but they could add up over time. Using your full annual gifting exemption could allow you to make tax-efficient gifts of £30,000 over 10 years.

Read more: Make your income more tax-efficient in 2026/27 with these 5 tax allowances

Don’t forget about your pension

Alongside making the most of your savings and investments, remember to review your pension in the new tax year.

Your annual allowance, which is the limit on the gross amount that can be saved into a pension each tax year without incurring tax charges, resets at the start of a new tax year.

The current standard annual allowance for pension contributions is £60,000 (2026/27) - this includes personal, employer and any third party contributions.

If you haven’t used up your allowance in the previous four previous years, you may also be able to carry it forward.

Your annual allowance may be reduced if you’re a high earner or you’ve already flexibly accessed your pension.

Make the most of your retirement savings by combining your pensions with PensionBee. View your savings in one place and make contributions easily via the website or app.

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.

Please note that tax rules change regularly, and the actual tax benefits you receive will depend on your individual circumstances. If you’re not sure, please seek professional advice.