In UHF (Ultra High Frequency) RFID (Radio Frequency Identification) systems Rx (Receiver) is usually isolated from Tx (Transmitter) by a circulator or a directional coupler. Since tags become more sensitive in order to improve reading distance, the relatively poor isolation of 20dB – 30dB limits the tag to reader link. A way to improve a directional coupler’s isolation is to mismatch the unused port to generate a carrier cancelling signal. An impedance network using digitally tunable capacitors was developed. The advantage of this solution is that changes in the system – like antenna characteristics or cable length - can be recalibrated at any time by the controller. Finally an isolation of minimum 47dB for any antenna characteristic (minimum return loss of 18dB) and any cable length was reached. Also an algorithm was implemented on a simple MSP430 controller to automatically find the optimum impedance to minimize carrier leakage.