The 2026 Tax Year:
Key Rates, Thresholds & Allowances

The 2026 Tax Year: Key Rates, Thresholds and Allowances — DKAT Accountants
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In this article
  1. Income tax — bands, rates and the personal allowance
  2. The £100,000 personal allowance trap
  3. Dividend and savings income
  4. National Insurance contributions
  5. Corporation tax
  6. VAT
  7. Capital Gains Tax
  8. Inheritance Tax
  9. Pensions and ISA allowances
  10. Key dates and deadlines for 2025/26

A new tax year brings a new set of numbers to navigate. The 2025/26 tax year (6 April 2025 to 5 April 2026) includes some significant changes — particularly to employer National Insurance, Capital Gains Tax, and the ongoing freeze on most income tax thresholds — alongside rates and allowances that have held steady for several years.

This guide pulls every key figure into one place, explained in plain English. All rates are verified against current HMRC guidance and apply to England, Wales and Northern Ireland unless stated otherwise. Scottish income tax rates differ and are noted where relevant.

Note on Scotland: Scotland sets its own income tax rates and bands on non-savings, non-dividend income. Scottish rates differ from those set out below. If you are a Scottish taxpayer, the Scottish rates apply to your employment and self-employment income. Dividend and savings income is taxed at UK-wide rates regardless of where you live.

Income tax — bands, rates and the personal allowance

The personal allowance — the amount you can earn each year completely free of income tax — remains frozen at £12,570 for 2025/26. This freeze has been in place since 2021/22 and is now confirmed to continue until at least April 2028. With wages rising, more people are being pulled into higher tax bands each year without any change to the headline rates. This is fiscal drag in practice.

Personal allowance 2025/26 — England, Wales & Northern Ireland
Personal allowance
£12,570
Frozen until
At least April 2028
Taper begins at
£100,000
Fully withdrawn at
£125,140

The income tax bands for 2025/26 (England, Wales and Northern Ireland) are as follows:

BandTaxable incomeRate
Personal allowanceUp to £12,5700%
Basic rate£12,571 – £50,27020%
Higher rate£50,271 – £125,14040%
Additional rateAbove £125,14045%

The upper limit of the basic rate band (£50,270) has also been frozen since 2021/22 and remains at this level for 2025/26. As wages rise, more taxpayers are crossing into the higher rate band.

The £100,000 personal allowance trap

One of the most significant — and least well-understood — features of the UK tax system is what happens to the personal allowance once your adjusted net income exceeds £100,000.

For every £2 of income above £100,000, you lose £1 of your personal allowance. By the time income reaches £125,140, the personal allowance is completely withdrawn. The effect is that income between £100,000 and £125,140 is effectively taxed at 60% — 40% higher rate income tax plus a further 20% because each £2 earned causes the loss of £1 of tax-free allowance.

Earning between £100,000 and £125,140? Making additional pension contributions or gift aid donations can reduce your adjusted net income below £100,000 and restore your personal allowance — potentially saving you thousands. This is one of the highest-value areas of personal tax planning available. Speak to a DKAT advisor before year-end.

Dividend and savings income

Dividend allowance and rates

The tax-free dividend allowance has been cut sharply in recent years — from £5,000 in 2017/18 to just £500 for 2025/26. This allowance has not increased and no change has been announced for the foreseeable future.

Dividend income above £500 is taxed at the following rates (which differ from standard income tax rates):

BandDividend tax rate 2025/26
Basic rate taxpayers8.75%
Higher rate taxpayers33.75%
Additional rate taxpayers39.35%

Dividends are added on top of other income when determining your tax band. They do not attract National Insurance contributions — which is why the salary-plus-dividend combination remains tax-efficient for company directors, despite the allowance reductions.

Personal savings allowance

Interest earned on savings is tax-free up to your Personal Savings Allowance:

Taxpayer typePersonal savings allowance
Basic rate taxpayers£1,000
Higher rate taxpayers£500
Additional rate taxpayers£0

Interest above the allowance is taxed at your marginal income tax rate (20%, 40% or 45%). Banks and building societies report interest directly to HMRC, so any tax due will typically be collected via a change to your tax code or through self-assessment.

National Insurance contributions 2025/26

The 2025/26 tax year brought the most significant changes to National Insurance in a generation, following the announcements in the October 2024 Autumn Budget.

Employee NI (Class 1 primary)

EarningsEmployee NI rate
Up to £12,570 per year (Primary Threshold)0%
£12,571 – £50,270 per year8%
Above £50,270 per year (Upper Earnings Limit)2%

Employer NI (Class 1 secondary) — major change from April 2025

This is where the biggest change has landed. From 6 April 2025:

The net effect is that employers now pay more NI on each employee's salary, starting from a lower income point — but the significantly higher Employment Allowance protects many smaller businesses. A business with two or more employees on typical salaries will often find the Employment Allowance covers much or all of the increased cost.

Sole directors who are the only employee of their company cannot claim Employment Allowance. For these directors, employer NI now starts at salary above £5,000/year. This has changed the optimal director salary calculation for 2025/26 — the previous £9,100 threshold-based strategy no longer applies. See our corporation tax article for updated guidance on director salary and dividend strategy.

Self-employed NI (Class 4)

Class 2 NI contributions were abolished from 6 April 2024. For 2025/26, self-employed individuals pay Class 4 NI only:

Profit bandClass 4 NI rate
Below £12,570 (Lower Profits Limit)0%
£12,571 – £50,2706%
Above £50,2702%

Self-employed individuals with profits between £6,845 and £12,570 are treated as if they have paid Class 2 NI for the purpose of building a qualifying year towards the State Pension, even though no actual payment is required.

Corporation tax 2025/26

The corporation tax rates that came into effect in April 2023 remain unchanged for 2025/26. The two-rate system rewards companies with lower profits:

ProfitsRateNote
Up to £50,00019%Small profits rate
£50,001 – £250,00019% to 25%Marginal relief applies
Above £250,00025%Main rate

Marginal relief applies to companies with profits between £50,000 and £250,000. Rather than a sudden jump from 19% to 25%, marginal relief tapers the effective rate between the two thresholds. The marginal relief fraction is 3/200 of (upper limit − profits) × (profits ÷ augmented profits).

Important for groups and associated companies: The £50,000 and £250,000 thresholds are divided by the number of associated companies. A company with two associates would see its thresholds reduced to £16,667 and £83,333 respectively. Failing to account for this is a common error.

The corporation tax return (CT600) must be filed with HMRC within 12 months of the company's accounting period end. Any tax due must be paid within 9 months and 1 day of the accounting period end — unless the company is large, in which case quarterly instalment payments apply.

VAT thresholds and rates

The VAT registration threshold — the level of taxable turnover at which a business must register for VAT — stands at £90,000 for 2025/26. This threshold was increased from £85,000 to £90,000 in April 2024 and remains at this level.

VAT rateApplies to
20% Standard rateMost goods and services
5% Reduced rateDomestic energy, children's car seats, some renovations
0% Zero rateMost food, children's clothing, books, public transport, new residential buildings
ExemptFinancial services, insurance, education, healthcare, land and property (in most cases)

The deregistration threshold is £88,000 — if your taxable turnover falls below this you may apply to deregister, though you can choose to remain VAT registered voluntarily.

Under Making Tax Digital for VAT, all VAT-registered businesses must keep digital records and submit returns using HMRC-approved software. This applies regardless of turnover. Non-compliance can result in penalties.

Capital Gains Tax

CGT underwent its most significant overhaul in a decade at the October 2024 Autumn Budget, with higher rates effective from 30 October 2024 for most assets. The 2025/26 tax year is the first full year under these new rates.

Annual exempt amount

Every individual has a tax-free CGT allowance each year. For 2025/26 this is £3,000 (down from £12,300 as recently as 2022/23). The allowance cannot be carried forward — it is use it or lose it each April.

Main CGT rates (from 30 October 2024 — all assets including residential property)

TaxpayerRate on gains
Basic rate taxpayers18%
Higher and additional rate taxpayers24%
Trusts and personal representatives24%

Whether you pay 18% or 24% depends on whether adding your net gains to your other taxable income keeps you within or above the basic rate band (£50,270 in 2025/26). If only part of your gains falls above the threshold, that portion is taxed at 24% and the rest at 18%.

Note that residential property rates (previously higher at 18%/28%) were reduced and aligned with all other assets from 30 October 2024. The rate on all gains — shares, property, crypto, business assets — is now the same 18%/24% structure.

Business Asset Disposal Relief (BADR)

BADR (formerly Entrepreneurs’ Relief) reduces CGT on qualifying business disposals — typically the sale of a trading business, shares in your own trading company (5%+ held for 2+ years as an employee or officer), or assets used in a business. The lifetime limit is £1 million of qualifying gains.

The BADR rate is subject to a phased increase following the October 2024 Budget:

PeriodBADR CGT rate
Pre 30 October 202410%
30 October 2024 – 5 April 202510%
6 April 2025 – 5 April 2026 (current)14%
From 6 April 202618%
Planning to sell your business or company shares? BADR at 14% applies now — but it rises to 18% from 6 April 2026. If you are considering a sale, timing the disposal before the end of this tax year (by 5 April 2026) could save up to 4% on qualifying gains. On a £1 million gain, that is a £40,000 difference. Take advice now.

60-day reporting rule for residential property

If you sell a residential property that is not your only or main home and a CGT gain arises, you must report the gain and pay the tax due to HMRC within 60 days of completion. This is separate from — and in addition to — any annual self-assessment return. Late reporting results in automatic penalties and interest.

Inheritance Tax

IHT remains frozen and broadening. The Office for Budget Responsibility estimates IHT will raise £8.7 billion in 2025/26, up sharply from £6.7 billion three years earlier — driven not by rate rises but by frozen thresholds against rising asset values.

Nil-rate bands 2025/26

AllowanceAmountConditions
Nil-Rate Band (NRB)£325,000Available to everyone. Frozen since 2009, now until at least April 2031.
Residence Nil-Rate Band (RNRB)£175,000Only where a main home is left to direct descendants (children, grandchildren). Tapers by £1 per £2 above £2m estate. Fully withdrawn above £2.35m.
Combined per personUp to £500,000NRB + RNRB, where the RNRB conditions are met.
Combined for married couple / civil partnersUp to £1,000,000Transferable NRB and RNRB. Must be actively claimed by the executor of the surviving spouse’s estate.

Rate: 40% on the value of the estate above the available thresholds. A reduced rate of 36% applies where at least 10% of the net estate is left to a qualifying UK charity.

Important upcoming changes

The seven-year rule

Gifts made to individuals more than seven years before death are generally exempt from IHT. Gifts made within seven years are “Potentially Exempt Transfers” (PETs) — they become chargeable if the donor dies within seven years, with taper relief reducing the tax charge for gifts made between three and seven years before death. The annual gift exemption (£3,000 per year per donor) remains unchanged.

Pensions and ISA allowances

Pension annual allowance

The maximum amount you can contribute to registered pension schemes in a tax year and still receive full tax relief is £60,000 (or 100% of your UK earnings if lower). This applies to the combined contributions of both you and your employer. The allowance was increased from £40,000 to £60,000 in April 2023 and remains at this level for 2025/26.

Carry forward: If you have been a member of a registered pension scheme in the previous three tax years and did not use your full annual allowance, you can carry forward the unused amount and add it to this year’s allowance. This is particularly valuable for company directors making large one-off employer pension contributions.

The Money Purchase Annual Allowance (MPAA) — which applies once you have flexibly accessed pension savings — is £10,000 for 2025/26. If the MPAA applies to you, only £10,000 of defined contribution contributions can receive tax relief, not the full £60,000.

The tapered annual allowance reduces the £60,000 for high earners. If your adjusted income exceeds £260,000, your annual allowance is reduced by £1 for every £2 above that level, down to a minimum of £10,000.

ISA allowances

ISA typeAnnual allowance 2025/26
Adult ISA (Cash or Stocks & Shares)£20,000
Lifetime ISA (age 18–39 only)£4,000 (counts within the £20,000 limit; 25% government bonus applies)
Junior ISA£9,000

ISA allowances cannot be carried forward — unused allowance is lost at 5 April each year. Income and gains within an ISA are permanently sheltered from income tax and CGT.

Key dates and deadlines for 2025/26

DateWhat is due
6 April 2025Start of the 2025/26 tax year. New rates and thresholds take effect.
5 October 2025Deadline to register for self-assessment if you are newly required to file a return for 2024/25.
31 October 2025Deadline for paper self-assessment returns for 2024/25.
Within 60 days of completionCGT return and payment due on residential property gains (rolling deadline throughout the year).
19 ⁄ 22 of each monthPAYE and NI due to HMRC (paper / electronic respectively) for the prior payroll month.
31 January 2026Online self-assessment deadline for 2024/25 returns and payment of any tax due. Also first payment on account for 2025/26 where applicable.
5 April 2026End of the 2025/26 tax year. Last date to use 2025/26 allowances (ISA, CGT exempt amount, pension contributions, annual gift exemption).
6 April 2026BADR rate rises from 14% to 18%. BPR/APR cap of £2.5m comes into force.

Confused by the numbers? Book a free call with a DKAT advisor.

The 2025/26 tax year brings more moving parts than most — employer NI changes, the updated CGT rates, frozen income tax thresholds, and major changes to BPR and pensions on the horizon. Our FCCA-qualified advisors work with individuals, landlords, directors and business owners across London and the UK. We'll tell you exactly where the numbers apply to your situation and what, if anything, you should be doing before the year closes.

Book Your Free Consultation →

Important notice: All rates, thresholds and allowances in this article are based on HMRC published guidance and legislation current at the date of writing (April 2026) and apply to the 2025/26 tax year (6 April 2025 to 5 April 2026) for England, Wales and Northern Ireland unless stated otherwise. Scottish income tax rates and bands differ. Tax law is subject to change and this article will be updated where material changes occur. This article is for general information and educational purposes only and does not constitute tax, legal or financial advice. You should not rely on this article as the basis for any financial or tax decision without first taking professional advice tailored to your individual circumstances. DKAT Accountants Ltd is regulated by the Association of Chartered Certified Accountants (ACCA). This article does not constitute a financial promotion.

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