UK tax thresholds 2026/27: the complete reference

UK tax thresholds for 2026/27 at a glance

The 2026/27 UK tax year runs from 6 April 2026 to 5 April 2027. Most of the income-tax figures below apply for the current tax year. This is a reference point, but a threshold only applies after the relevant rules, allowances and type of income have been considered.

The figures below apply to taxpayers in England, Wales, and Northern Ireland. Scotland has its own income tax bands, which we note separately further down.

Income tax bands and rates

Income tax in 2026/27 is charged at three rates after the personal allowance. You only pay the higher rate on the portion of your income that crosses into each band, not on your whole income.

A worked example. If your taxable income is £60,000, the calculation is:

• First £12,570 at 0% = £0
• Next £37,700 at 20% = £7,540
• Final £9,730 at 40% = £3,892
• Total income tax: £11,432

National Insurance is calculated separately on the same income, so it adds to this. We cover that below.

What is a tax bracket?

A tax bracket is a band of income taxed at one rate. Your marginal rate is the rate you pay on your next pound of income. Your effective rate is your total income tax divided by your total income.

In the £60,000 example above, total income tax is £11,432. The effective rate is about 19.1%, while the marginal rate is 40%. Moving into a higher bracket does not mean all your income is taxed at the higher rate. Only the part within that band is taxed at that rate.

Tax brackets for the self-employed

Sole traders pay the same income tax bands on profit, not turnover, through Self Assessment. Profit is your business income less allowable expenses. The bands above apply in England, Wales and Northern Ireland; Scottish income tax bands apply to Scottish residents.

Self-employed tax rates also include Class 4 National Insurance: 6% on profits over £12,570 up to £50,270, and 2% on profits above £50,270.

Class 2 National Insurance is no longer compulsory. For 2026/27, profits of £7,105 or more meet the small profits threshold. Class 2 contributions are treated as paid automatically, protecting your State Pension record. Below £7,105, you can pay £3.65 a week voluntarily.

Use the Self Assessment tax calculator to estimate your bill. Read about accounting for sole traders for help with records and returns.

2025/26 vs 2026/27 income tax rates

The income tax bands on non-savings income are unchanged between 2025/26 and 2026/27 in England, Wales and Northern Ireland. The table shows income ranges with the standard personal allowance.

The £100,000 trap

The personal allowance starts to taper away once your adjusted net income passes £100,000. For every £2 you earn above £100,000, you lose £1 of allowance. By the time your income reaches £125,140, the allowance has gone entirely.

The effect is that income between £100,000 and £125,140 is taxed at an effective marginal rate of 60% (40% on the income, plus losing 50p of allowance for every £1 over £100,000, which exposes another 50p to 40% tax, an extra 20p). This is a common planning point for clients near that band. Pension contributions or charitable donations are two of the standard ways to keep adjusted net income below the trap.

National Insurance thresholds

National Insurance for 2026/27 has the same structure as last year. The thresholds match income tax in most cases.

The big change in 2025 was the cut in the employer secondary threshold from £9,100 to £5,000, alongside a rate increase from 13.8% to 15%. For 2026/27 those changes carry through, which means employer NI is materially higher than it was two years ago. If you run a payroll, this is the line item to watch in your monthly figures.

Allowances that sit alongside income tax

These are separate from the personal allowance. They apply to specific types of income or gains. You can use them in addition to the £12,570.

Dividend allowance

£500 of dividend income is tax-free in 2026/27. Above that, dividends are taxed at 10.75% (basic rate), 35.75% (higher rate), or 39.35% (additional rate). The basic and higher rates rose by 2 percentage points from 6 April 2026 (Budget 2025 change). The allowance has fallen from £2,000 in 2022/23, so most company directors who take dividends will use it up quickly.

Personal savings allowance

Interest from savings accounts is tax-free up to:

• £1,000 a year if you are a basic rate taxpayer
• £500 a year if you are a higher rate taxpayer
• £0 if you are an additional rate taxpayer

Starting rate for savings

A separate £5,000 starting rate band for savings income exists for people whose non-savings income is below £17,570. It tapers as non-savings income rises. Most working clients never see it.

Trading and property allowances

The first £1,000 of trading income (small side hustles) and the first £1,000 of property income are tax-free. You do not need to register for Self Assessment if your gross income from either source is below £1,000.

Rent-a-room relief

If you let a furnished room in your main home, the first £7,500 of rent is tax-free under rent-a-room. The figure has been at £7,500 since 2016 and is currently frozen.

Marriage Allowance

If you are married or in a civil partnership and one of you earns below the personal allowance, you can transfer £1,260 of allowance to the higher-earning partner. That saves the recipient up to £252 a year. The donor's tax code changes from 1257L to 1257N; the recipient's becomes 1257M.

What counts as taxable income, and what is tax-free?

Taxable income in the UK includes the following. The tax you pay depends on the allowances and reliefs available to you.

• Employment pay and taxable benefits in kind.
• Self-employed profit and rental profit.
• Pensions, including the State Pension.
• Savings interest above your allowances.
• Dividends above the £500 dividend allowance.

Tax-free income and tax exemption examples include:

• Interest, dividends and gains within an ISA.
• Premium Bond prizes.
• The first £1,000 of trading income and first £1,000 of property income under the relevant allowances, where eligible.
• Up to £7,500 from letting furnished accommodation in your main home under Rent a Room relief. The limit halves if you share the income.
• Some state benefits, such as Child Benefit. Others, such as Carer's Allowance, are taxable. Child Benefit is subject to the High Income Child Benefit Charge.
• Winnings from betting and the National Lottery.
• The tax-free 25% pension lump sum, subject to your available lump sum allowance and other limits.

A tax exemption removes qualifying income or gains from tax. An allowance provides a tax-free amount under its own rules.

Capital Gains Tax thresholds

Capital Gains Tax (CGT) can apply when you dispose of an asset for more than its allowable cost. For 2026/27, the headline figures are:

• Annual exemption: £3,000 (down from £6,000 in 2023/24 and £12,300 in 2022/23)
• Most individual gains: 18% or 24%, depending on taxable income and the gain
• Business Asset Disposal Relief and Investors' Relief: 18% on qualifying gains

Relief eligibility, the order of income and gains, and special categories can change the result. Use the official CGT guidance or take advice before relying on a headline rate for a disposal.

ISA, pension, and other savings limits

• ISA annual allowance: £20,000 per person
• Junior ISA: £9,000 per child
• Lifetime ISA: £4,000 (counts toward the £20,000 ISA limit)
• Annual pension allowance: £60,000 (tapered above £260,000 of adjusted income)
• Money Purchase Annual Allowance: £10,000 (if you have already taken taxable money from a defined contribution pension)

The pension annual allowance is the most generous shelter most working clients have access to. Contributions reduce your adjusted net income, which can pull you back below the £100,000 trap if you are close to it.

VAT registration thresholds

Most business owners only think about VAT thresholds once a year. The numbers for 2026/27:

• Compulsory registration threshold: £90,000 of taxable turnover in any rolling 12 months
• Deregistration threshold: £88,000
• VAT standard rate: 20%
• VAT reduced rate: 5%
• VAT zero rate: 0% (still requires VAT registration and returns)

The £90,000 threshold is checked on a 12-month rolling basis, not the calendar year. If you sense you are getting close, run the numbers monthly rather than waiting for year-end.

Corporation Tax thresholds

For limited companies, the headline rates are:

• Profits up to £50,000: 19% (small profits rate)
• Profits over £250,000: 25%
• Profits between £50,000 and £250,000: marginal relief, effective rate between 19% and 26.5%

The marginal band catches a lot of clients off guard. Effective rates inside it can exceed the headline 25% because of the way the relief is calculated. If you are projecting profits between £50,000 and £250,000, planning the year-end carefully is worth doing.

Inheritance Tax thresholds

• Nil rate band: £325,000 per person (frozen until 5 April 2031)
• Residence nil rate band: up to £175,000 if a home is left to direct descendants (frozen until 5 April 2031)
• Standard rate above the bands: 40%
• Reduced rate when 10%+ of estate left to charity: 36%

The combined £500,000 per person, or £1 million per couple, has not moved since 2020/21. Asset values have. The slow squeeze is real revenue for HMRC and a real planning issue for clients with property in the South East.

Scotland income tax bands

Scottish residents pay income tax under bands set by the Scottish Parliament. For 2026/27:

National Insurance, the personal allowance, and the £100,000 taper are the same as the rest of the UK. Scotland only diverges on income tax rates and bands, not the other allowances.

What changed and what stayed the same

The list of frozen thresholds is now long. Items that have not moved in 2026/27:

• Personal allowance (£12,570), frozen since 2021/22
• Higher and additional rate thresholds (£50,270 and £125,140), frozen since 2022/23
• Inheritance Tax nil rate band (£325,000), frozen since 2009
• VAT registration threshold (£90,000), only moved once since 2017
• Dividend allowance (£500) and CGT exemption (£3,000), frozen at their reduced levels

Items that have moved recently:

• Employer NI threshold dropped from £9,100 to £5,000 (April 2025)
• Employer NI rate rose from 13.8% to 15% (April 2025)
• Business Asset Disposal Relief rate is 18% for qualifying disposals from 6 April 2026
• Investors' Relief rate is 18% for qualifying gains from 6 April 2026

How to work out which band you fall into

If you only have salary income, the easiest way is the salary calculator. It applies the bands correctly and shows your take-home line by line.

Open the RR salary calculator

If you have more than one source of income (salary plus dividends, or rental property, or self-employment), the bands work on your combined total. The order they apply matters, and dividend rates are different from non-savings rates. That is where most DIY calculators come unstuck. A 30-minute call with us is usually enough to walk through it.

Official sources

• GOV.UK: Income Tax rates and Personal Allowances
• GOV.UK: National Insurance contribution rates
• GOV.UK: Capital Gains Tax rates and allowances
• GOV.UK: VAT registration threshold
• GOV.UK: Corporation Tax rates
• GOV.UK: Inheritance Tax thresholds and allowances