What are the UK tax rates, thresholds and allowances for 2026/27?

What are the UK tax rates, thresholds and allowances for 2026/27?

For the 2026/27 tax year, which runs from 6 April 2026 to 5 April 2027, the Personal Allowance is £12,570. Above that, most people in England, Wales and Northern Ireland pay Income Tax at 20% up to £50,270, 40% up to £125,140 and 45% above that. Most of these thresholds are frozen, and are now set to stay frozen until April 2031.

The rates that did change this year sit elsewhere. Dividend tax went up by two percentage points, and the rate for Business Asset Disposal Relief rose again. This guide gathers the main UK tax rates and allowances for 2026/27 in one place, covering personal tax first and business tax after, with every figure checked against official sources.

Source: Income Tax rates and Personal Allowances (GOV.UK)

What are the Income Tax bands for 2026/27?

In England, Wales and Northern Ireland, income above the Personal Allowance is taxed in three bands. These are marginal rates, meaning each rate applies only to the slice of income inside that band, never to the whole amount.

1. Personal Allowance: up to £12,570, taxed at 0%.
2. Basic rate: £12,571 to £50,270, taxed at 20%.
3. Higher rate: £50,271 to £125,140, taxed at 40%.
4. Additional rate: over £125,140, taxed at 45%.

The Personal Allowance is reduced once adjusted net income passes £100,000. Adjusted net income means your total taxable income minus certain reliefs, such as pension contributions and Gift Aid. You lose £1 of allowance for every £2 above £100,000, so the allowance is nil at £125,140. Wales has the power to set its own rates but has kept them the same as England and Northern Ireland for 2026/27.

Source: Income Tax rates and Personal Allowances (GOV.UK)

How is Income Tax different in Scotland?

Scotland sets its own rates and bands for income from work, self-employment, pensions and property. Scottish taxpayers pay the same rates as the rest of the UK on savings interest and dividends. The Scottish bands for 2026/27, with the standard £12,570 Personal Allowance, are:

1. Starter rate: £12,571 to £16,537, taxed at 19%.
2. Basic rate: £16,538 to £29,526, taxed at 20%.
3. Intermediate rate: £29,527 to £43,662, taxed at 21%.
4. Higher rate: £43,663 to £75,000, taxed at 42%.
5. Advanced rate: £75,001 to £125,140, taxed at 45%.
6. Top rate: over £125,140, taxed at 48%.

Source: Income Tax in Scotland (GOV.UK)

What tax-free allowances can you use in 2026/27?

Beyond the Personal Allowance, several smaller allowances let you receive certain income tax free. Used together, they can make a real difference.

1. Trading allowance: your first £1,000 of self-employment income is tax free. A matching £1,000 property allowance covers rental income. Neither applies to income from your own limited company.
2. Personal Savings Allowance: £1,000 of savings interest tax free for basic rate taxpayers, £500 for higher rate, nil for additional rate. Low earners may also get a starting rate for savings of up to £5,000.
3. Dividend allowance: the first £500 of dividend income is tax free.
4. Marriage Allowance: a low earning spouse or civil partner can transfer £1,260 of their Personal Allowance, saving the couple up to £252. The receiving partner must pay tax at no more than the basic rate.
5. Blind Person’s Allowance: an extra £3,250 added to the Personal Allowance for those who qualify.
6. ISA allowance: you can save up to £20,000 in ISAs, with no tax on the interest, dividends or gains inside them.
7. Pension annual allowance: tax relief on pension contributions of up to £60,000 a year, or 100% of your earnings if lower.

Source: Income Tax rates and Personal Allowances (GOV.UK)

Source: Tax on savings interest (GOV.UK)

Source: Marriage Allowance (GOV.UK)

What are the dividend tax rates for 2026/27?

Dividends are payments a company makes to its shareholders out of its profits. This is one area that changed at the Autumn Budget 2025. From 6 April 2026, dividends above the £500 allowance are taxed at 10.75% at the basic rate and 35.75% at the higher rate, both up two percentage points on last year. The additional rate stays at 39.35%.

This matters most to limited company directors who pay themselves through a mix of salary and dividends. The right mix has shifted with these rates, so it is worth reviewing rather than repeating last year’s approach. Dividends from shares held in an ISA remain tax free.

Source: Tax on dividends (GOV.UK)

How much National Insurance will you pay?

Employees (Class 1)

Employees pay 8% on earnings between £12,570 and £50,270 a year, and 2% on earnings above that. Earnings between the Lower Earnings Limit of £6,708 and £12,570 attract no contributions but still protect your State Pension record. These deductions are made automatically through payroll.

Employers

Employers pay 15% on each employee’s earnings above £5,000 a year. Eligible employers can claim the Employment Allowance, which cuts the employer National Insurance bill by up to £10,500 a year. Companies where a sole director is the only paid employee cannot claim it.

Self-employed (Class 2 and Class 4)

Sole traders pay Class 4 contributions through Self Assessment: 6% on profits between £12,570 and £50,270, and 2% above that. Class 2 is no longer compulsory. If your profits are at least £7,105, your State Pension record is protected without paying anything. Below that, you can pay Class 2 voluntarily at £3.65 a week to keep your record going.

Source: National Insurance rates and categories (GOV.UK)

Source: Self-employed National Insurance rates (GOV.UK)

What are the Capital Gains Tax rates for 2026/27?

Capital Gains Tax is charged on the profit you make when you sell or give away an asset that has risen in value, such as shares or a second property. The first £3,000 of gains each year is exempt. Above that, gains are taxed at 18% where they fall within your unused basic rate band and 24% above it. The same rates now apply to residential property and other assets.

Business Asset Disposal Relief, which reduces the rate when you sell all or part of a qualifying business, is 18% for disposals from 6 April 2026, up from 14% last year and 10% before that. The relief has a £1 million lifetime limit and the qualifying conditions must be met for at least two years. If you sell a UK residential property with tax to pay, you must report and pay within 60 days of completion.

Source: Capital Gains Tax rates (GOV.UK)

Source: Business Asset Disposal Relief (GOV.UK)

What tax do limited companies pay?

Limited companies pay Corporation Tax on their profits rather than Income Tax. For 2026/27 the small profits rate is 19% on profits up to £50,000 and the main rate is 25% on profits over £250,000. Between those figures, marginal relief applies, which gradually raises the effective rate from 19% towards 25% as profits grow. The thresholds are shared if you control more than one company.

Take an illustrative example. Haris runs a design company in Wolverhampton with taxable profits of £40,000. His profits sit below £50,000, so the whole amount is taxed at 19%, a Corporation Tax bill of £7,600. This example is for illustration only.

VAT is separate. You must register once your taxable turnover, meaning sales that are not VAT exempt, passes £90,000 over any rolling 12 months. You can deregister if turnover falls below £88,000. The standard VAT rate is 20%, with a reduced rate of 5% and a zero rate for certain goods and services.

Source: Corporation Tax rates (GOV.UK)

Source: VAT registration (GOV.UK)

What are the approved mileage rates?

If you use your own vehicle for business journeys, HMRC’s approved rates are 45p a mile for the first 10,000 miles in a car or van and 25p a mile after that, with 24p for motorcycles and 20p for bicycles. Ordinary commuting does not count. Be careful with figures you see elsewhere: some widely read guides currently show the car rate incorrectly, but 45p is the rate on GOV.UK.

Source: Claim tax relief for your job expenses: vehicles (GOV.UK)

What is changing over the next few years?

The Autumn Budget 2025 extended the freeze on the Personal Allowance and Income Tax thresholds by three years, to April 2031. Frozen thresholds pull more people into tax, and into higher bands, as wages rise, an effect known as fiscal drag.

Two further changes are already announced for April 2027. Tax rates on savings interest will rise by two percentage points to 22%, 42% and 47%, and a separate set of rates at the same levels will apply to property income. If you are a landlord or hold large cash savings outside an ISA, it is worth planning for these now.

Source: Income tax: freezing the personal allowance and the higher rate threshold (House of Commons Library)

Frequently asked questions

When does the 2026/27 tax year start and end?

It runs from 6 April 2026 to 5 April 2027. Company Corporation Tax works to a different calendar: the financial year for companies starts on 1 April.

Did Income Tax rates change this year?

No. The rates and bands for earnings are unchanged from 2025/26. The rises this year fall on dividends, up two percentage points at the basic and higher rates, and on Business Asset Disposal Relief, up from 14% to 18%.

Will the Personal Allowance rise soon?

Not under current plans. It has been £12,570 since April 2021 and is now frozen until April 2031, along with the higher and additional rate thresholds. Future Budgets could change this.

Do I pay Income Tax and National Insurance on the same income?

Yes, if you are employed or self-employed. Both are charged on your earnings or profits, though at different rates and with slightly different rules. Pension income, savings interest, dividends and rent attract Income Tax but not National Insurance.

What about Child Benefit if I earn over £60,000?

The High Income Child Benefit Charge applies once the higher earner in a household has adjusted net income over £60,000. It claws back 1% of Child Benefit for every £200 above that, so the benefit is fully withdrawn at £80,000.

Source: High Income Child Benefit Charge (GOV.UK)

How WV4 Accountants can help

Knowing the numbers is one thing. Arranging your affairs around them is another, especially with dividend rates rising and thresholds frozen for years to come. WV4 Accountants can help you:

1. Plan the most tax-efficient mix of salary, dividends and pension contributions for the new rates.
2. Prepare and file your Self Assessment, Corporation Tax and VAT returns accurately and on time.
3. Make full use of the allowances you are entitled to, from the trading allowance to Marriage Allowance.
4. Plan ahead for the announced changes to savings and property income rates from April 2027.

If you would like help applying the 2026/27 UK tax rates and allowances to your own situation, get in touch with WV4 Accountants for a friendly, no pressure conversation.

Important note: This article provides general information. Tax treatment depends on individual circumstances. Current HMRC guidance should be checked before action is taken.