UK Tax Rates and Allowances 2026/27: Bands, Thresholds and What’s Changed

Paying more tax than necessary often results from not understanding the tax rules that apply to your income. Many people miss out on valuable UK tax allowances, fail to plan around income thresholds, or unknowingly move into higher tax bands, resulting in a larger tax bill than expected. 

In some cases, a salary increase can even trigger additional tax liabilities by reducing access to certain allowances. Frozen tax thresholds make the challenge worse, as they keep pushing more taxpayers into higher tax bands as earnings rise. The good news is that understanding the latest UK tax rates and allowances can help you calculate your tax correctly and make informed financial decisions. 

The 2026/27 UK tax year runs from 6 April 2026 to 5 April 2027. Whether you’re an employee, self-employed individual, company director, landlord, investor or pensioner, this guide explains the tax bands, thresholds and allowances that may affect how much tax you pay during the year. Figures are based on information published by HM Revenue & Customs (HMRC) and for Scottish rates, the Scottish Government. 

2026/27 Tax Rates and Allowances at a Glance

Wondering how much tax you’ll actually pay in 2026/27? The answer depends on more than just your income. Tax bands, allowances, and key thresholds can all affect your final tax bill. The summary below provides a quick overview of the rates and allowances that may apply during the 2026/27 tax year.

What’s Changed for 2026/27, and What’s Coming

While many headline tax thresholds remain unchanged for 2026/27, several key developments could affect how much tax you pay and how you manage your finances. Dividend tax rates have increased, Business Asset Disposal Relief now attracts a higher rate, and Making Tax Digital for Income Tax is being rolled out to more taxpayers. Meanwhile, the State Pension has increased under the Triple Lock, giving pensioners more income. Despite these changes, some key elements of the tax system remain frozen, including Income Tax bands, National Insurance rates and the annual ISA allowance.

Key changes for 2026/27 include:

1. Dividend tax rates increased by 2 percentage points for basic and higher-rate taxpayers.
2. Business Asset Disposal Relief (BADR) increased to 18%.
3. Making Tax Digital for Income Tax commenced for qualifying self-employed individuals and landlords with income exceeding £50,000.
4. State Pension payments increased under the Triple Lock.
5. Income Tax bands, National Insurance rates and the annual ISA allowance remain unchanged.

What’s Coming in 2027/28 and Beyond

While the 2026/27 tax year brings relatively few major changes, further reforms are already planned. From April 2027, new tax rates for savings and property income will take effect, along with changes to how personal allowances are applied. Although key Income Tax thresholds will remain frozen until 2030/31, these upcoming measures could increase tax liabilities for some landlords, investors and savers. Understanding what’s ahead can help you plan more effectively and avoid unexpected tax costs in future years.

Then follow with your bullets or details on:

1. Savings income rates

2. Property income rates

3. Personal Allowance ordering changes

4. Frozen thresholds until 2030/31

Although the 2026/27 tax year brings relatively few structural changes, further reforms are already scheduled from 6 April 2027. While the Personal Allowance will remain at £12,570 and the higher-rate threshold at £50,270, new tax rates for savings and property income will take effect.

Under the planned rules, savings income and property income will be taxed at 22% for basic-rate taxpayers, 42% for higher-rate taxpayers, and 47% for additional-rate taxpayers. Another significant change is the order in which tax allowances are applied. From April 2027, the Personal Allowance and certain reliefs will generally be allocated to other forms of income before savings, property and dividend income. As a result, landlords, investors and individuals with substantial savings income may see a different tax outcome than under the current rules.

While these changes are still ahead, understanding them early can help affected taxpayers review their income structure and prepare for any potential increase in tax liabilities.

What’s Genuinely Added Here?

1. You’ve not just listed the changes; you’ve explained their practical impact.
2. You’ve created a bridge between 2026/27 changes and 2027/28 upcoming reforms.
3. You’ve highlighted who is affected (landlords, investors, savers), which adds real value beyond repeating HMRC figures.
4. The flow now moves from “What’s changed now?” → “What’s changing next?”, which keeps readers engaged and reduces bounce.

 Income Tax Bands (England, Wales, Northern Ireland)

Income Tax on non-savings, non-dividend income is charged at three rates: the basic rate, the higher rate and the additional rate in England, Wales and Northern Ireland. Scotland has a separate Income Tax system with its own bands and rates. The following tables provide an overview of the rates and thresholds that apply in 2026/27, together with the changes scheduled for 2027/28.

Tax Band	Taxable Income	Tax Rate
Personal Allowance	Up to £12,570	0%
Basic Rate	£12,571 to £50,270	20%
Higher Rate	£50,271 to £125,140	40%
Additional Rate	Over £125,140	45%

These Frozen thresholds keep creating fiscal drag, pushing more taxpayers into higher tax bands as wages rise. 

The table looks simple, but two rules can change how much tax you actually pay. 

First, once your adjusted net income goes over £100,000, you start losing your Personal Allowance: £1 for every £2 above £100,000, until it’s gone completely at £125,140. This creates an effective tax rate of 60% on income in that range. 

Second, HMRC adds all your income together, including your salary, second job, self-employed profits, rental income, and pension, then applies the tax bands to the total, not each job separately. We explain both rules in more detail below, including how to avoid the £100,000 trap. 

Scottish Income Tax Rates 2026/27

Do you live in Scotland? If so, your Income Tax bill may look very different from that of someone earning the same income elsewhere in the UK. Scotland has its own Income Tax bands and rates for wages, pensions and most other taxable income, while savings and dividend income continue to follow UK-wide rules. As a result, Scottish taxpayers can move into higher tax bands at lower income levels than taxpayers in England, Wales and Northern Ireland. The table below outlines the Scottish Income Tax rates and thresholds for 2026/27. 

Band	Taxable Income	Scottish Tax Rate
Personal Allowance	Up to £12,570	0%
Starter rate	£12,571 to  £16,537	19%
Basic rate	£16,538 to  £29,526	20%
Intermediate rate	£29,527 to  £43,662	21%
Higher rate	£43,663 to  £75,000	42%
Advanced rate	£75,001 to  £125,140	45%
Top rate	Over  £125,140	48%

The £100,000 Tax Trap Explained.

A pay rise should leave you better off, right? Not always. Thousands of UK professionals are caught out every year after crossing the £100,000 income threshold. The reason? Your tax-free Personal Allowance starts disappearing, increasing your tax bill without many people realising it. The rules remain unchanged for 2026/27 and 2027/28, and the Personal Allowance is frozen until April 2031.

How the Personal Allowance Taper Works

Once your income exceeds £100,000, you lose £1 of Personal Allowance for every £2 earned above the threshold. By £125,140, you’ve lost your entire allowance.

Why Earnings Between £100,000 and £125,140 Are Effectively Taxed at 60%

This is where the tax trap bites.

Example: Earn an extra £1,000 above £100,000:

• £400 lost to 40% Income Tax
• £500 of Personal Allowance withdrawn
• Extra £200 tax on that lost allowance

Result: £600 tax on £1,000 of additional income, an effective 60% tax rate.

The Hidden Costs: Childcare Benefits

Many parents focus on the extra tax they’ll pay after crossing the £100,000 threshold, but the bigger shock often comes later. If your adjusted net income exceeds £100,000, you could lose eligibility for Tax-Free Childcare and funded childcare support. In some cases, a modest pay rise or bonus can leave families worse off once those benefits disappear.

How to Get Back Below £100,000

What if a simple pension contribution could save you from one of the UK’s most expensive tax traps? If your income hovers around the £100,000 threshold, additional pension contributions, salary sacrifice arrangements, or donating through Gift Aid could help reduce your adjusted net income. These strategies may allow you to keep more of your Personal Allowance and avoid losing valuable childcare benefits.

National Insurance Rates and Thresholds 2026/27

Your payslip has two major deductions, and most people understand only one. National Insurance (NI) is taken alongside Income Tax but follows its own rules. For 2026/27, NI rates and thresholds are unchanged. Employees pay 8% between £12,570 and £50,270 and 2% above; the self-employed pay 6% and 2%, and employers pay 15% above £5,000.

Employee NI

Employees under State Pension age pay Class 1 NI through PAYE:

1. 0% up to £12,570 a year (£1,048 a month)

2. 8% between £12,570 and £50,270

3. 2% above £50,270

Example: On a £35,000 salary, you pay about £1,794 a year, or roughly £150 a month.

NI is calculated per pay period, so a bonus month means more NI that month, and each job gets its own threshold.

Self-Employed NI

The self-employed pay Class 4 NI on profits through Self Assessment:

• 6% between £12,570 and £50,270
• 2% above £50,270

Class 2 NI is now voluntary. If your profits are above the Small Profits Threshold, you can protect your State Pension record for free. If they’re below it, you can pay voluntary Class 2 for just a few pounds a week, a cheap way to build the 35 qualifying years needed for the full State Pension.

Employer NI

Employers pay 15% on earnings above £5,000 a year, on top of your salary. It isn’t deducted from your pay.

The Employment Allowance cuts this by up to £10,500 a year, though companies whose only employee is the director can’t claim it. Employers also pay no NI up to £50,270 for employees under 21 and apprentices under 25.

How NI Differs from Income Tax

1. What’s charged: NI applies only to earnings from work, not pensions, savings, dividends or rent.
2. When it stops: NI stops at State Pension age, but Income Tax continues.
3. How it’s calculated: NI works per pay period, while Income Tax uses your annual allowance.
4. What it’s for: NI builds your State Pension entitlement.

Because dividends carry no NI, many company directors take them. However, dividend tax rates for basic and higher rate taxpayers rose by 2 percentage points from April 2026.

Tax on Savings, Dividends and Investments

Your savings could be creating an unexpected tax bill. As savings rates stay elevated and allowances remain frozen, more people are finding that the interest they’re earning is no longer completely tax-free. Because banks share interest information directly with HMRC,  tax due on interest rarely goes unnoticed. Here’s what you need to know about the 2026/27 savings and dividend allowances, how to make the most of your ISA allowance, and the changes set to impact savers from April 2027.

Personal Savings Allowance

The Personal Savings Allowance (PSA) lets you earn some savings interest tax-free each year. How much depends on your Income Tax band:

Tax Band	Tax-free Interest
Basic rate	£1,000
Higher rate	£500
Additional rate	£0

Interest above your allowance is taxed at your usual rate. For example, a higher-rate taxpayer with £15,000 in an account paying 4% earns £600, so £100 is taxable. Interest earned inside an ISA doesn’t count towards your PSA.

From April 2027: Tax rates on savings income will rise by 2 percentage points, to 22%, 42% and 47%.

Starting Rate for Savings

In addition to the Personal Savings Allowance, some people can earn up to £5,000 of savings interest tax-free through the Starting Rate for Savings.

This £5,000 band is reduced by £1 for every £1 of non-savings income (such as salary or pension income) above the £12,570 Personal Allowance. Once your non-savings income reaches £17,570, you no longer get the starting rate.

The relief mainly benefits retirees, part-time workers, and people with lower incomes. For example, someone with £14,000 of non-savings income would still have £3,570 of their Starting Rate for Savings available (£5,000 – £1,430), alongside their £1,000 Personal Savings Allowance, allowing up to £4,570 of savings interest to be received tax-free.

Dividend Allowance and Dividend Tax Rates

The Dividend Allowance remains £500 for the 2026/27 tax year. This means the first £500 of dividend income is taxed at 0%, although it still counts towards your tax bands.

Dividends above the allowance are taxed at the following rates:

1. Basic-rate taxpayers: 10.75% (up from 8.75%)

2. Higher-rate taxpayers: 35.75% (up from 33.75%)

3. Additional-rate taxpayers: 39.35% (unchanged) 

The increase mainly affects owner-managed company directors who take income through dividends and investors holding shares outside tax-efficient wrappers. Dividends received within an ISA or pension remain free from dividend tax.

ISA Allowance

An Individual Savings Account (ISA) is a tax-efficient account that allows you to save or invest money without paying UK tax on the interest, dividends, or capital gains it generates.

For the 2026/27 tax year, you can contribute up to £20,000 into ISAs, making them one of the most effective ways to protect your money from future tax bills while growing your savings and investments.

Think of an ISA as a tax-free wrapper around your money. Whether you earn interest on cash savings, receive dividends from shares, or benefit from investment growth, returns generated within the account are generally sheltered from Income Tax, Dividend Tax, and Capital Gains Tax.

You can use your annual ISA allowance across a range of ISA types, including:

1. Cash ISA – for tax-free savings and emergency funds.
2. Stocks and Shares ISA – for investing in shares, funds, ETFs, and bonds.
3. Lifetime ISA (LISA) – contribute up to £4,000 per year and receive a 25% government bonus towards a first home or retirement.
4. Innovative Finance ISA – designed for eligible peer-to-peer lending investments.

With savings and dividend allowances becoming increasingly valuable, maximising your ISA allowance each year can help you keep more of your returns and reduce your exposure to future tax changes.

UK Pension Tax Allowances 2026/27: What You Can Pay In, Take Out, and Claim Back

Want to pay less tax while saving for retirement? Pensions remain one of the UK’s most valuable tax breaks. A basic-rate taxpayer only needs to contribute £80 for £100 in pension, while higher-rate taxpayers may be able to reduce the real cost even further.

Annual Pension Allowance: £60,000

Most people can contribute up to £60,000 to their pension in 2026/27 while still receiving tax relief. This includes your contributions, employer contributions, and tax relief. High earners may face a reduced allowance under the Tapered Annual Allowance rules.

Money Purchase Annual Allowance (MPAA): £10,000

If you’ve already started taking taxable income from a defined contribution pension, your future contribution limit may drop to £10,000 per year under the MPAA.

Tax-Free Pension Lump Sum

Most people can take up to 25% of their pension benefits tax-free, subject to the current Lump Sum Allowance of £268,275. Any amount above your available tax-free entitlement is generally taxed as income.

Pension Tax Relief

The government boosts pension contributions through tax relief:

1. Basic-rate taxpayers receive 20% relief.
2. Higher and additional-rate taxpayers can claim extra relief from HMRC.

For example, a £100 pension contribution could cost a higher-rate taxpayer as little as £60 after tax relief.

Why It Matters

Pension contributions don’t just help fund your retirement. They can also reduce your taxable income, making them a useful planning tool, especially for higher earners looking to avoid unnecessary tax.

Inheritance Tax 2026/27

Many people assume Inheritance Tax (IHT) only affects the very wealthy. In reality, rising property values and frozen tax thresholds mean more UK families are being caught by it each year.

Inheritance Tax is charged on the value of your estate, including property, savings, investments, and possessions, when you pass away. For the 2026/27 tax year, the standard Inheritance Tax threshold (Nil Rate Band) remains £325,000. If you’re leaving your home to your children or grandchildren, you may also qualify for the Residence Nil Rate Band of up to £175,000, giving you a potential tax-free allowance of £500,000. Married couples and civil partners can often combine their allowances, allowing up to £1 million to pass on tax-free.

Any part of your estate above these allowances is usually taxed at 40%. However, if at least 10% of your estate is left to charity, the rate may reduce to 36%.

The good news? Most estates still fall below the threshold. But if you own property, have substantial savings, or are planning to leave assets to family members, understanding the current UK Inheritance Tax rules, IHT thresholds, and estate planning allowances could save your loved ones thousands of pounds.

Allowances for Side Hustles, Self-Employed People and Landlords

Whether you’re selling on eBay, freelancing in your spare time, running a small business, or earning rental income, several valuable tax allowances can help you keep more of what you earn.

Many people search “How much can I earn before registering as self-employed?” or “Do I have to pay tax on side hustle income?” The answer often starts with the allowances below.

Trading Allowance (£1,000)

Made money from a side hustle? You may not need to pay tax on all of it.

The Trading Allowance lets you earn up to £1,000 per tax year from self-employment or casual income without paying tax on that income. This includes activities such as:

1. Freelancing

2. Online selling

3. Content creation

4. Tutoring

5. Craft businesses

6. Gig economy work

For example, if you earn £750 from selling handmade products online, the Trading Allowance can cover that income entirely.

If your income exceeds £1,000, you can either claim the allowance or deduct actual business expenses, whichever gives you the better tax outcome.

Property Allowance (£1,000)

If you earn a small amount from property-related income, the Property Allowance could reduce your tax bill.

It provides up to £1,000 of tax-free property income each year, covering income from activities such as:

• Renting out land
• Letting parking spaces or driveways
• Short-term property income
• Other casual property earnings

For many people with modest rental income, this allowance removes the need to calculate and claim small expenses individually.

Rent-a-Room Relief (£7,500)

Got a spare room sitting empty?

The Rent-a-Room Scheme allows homeowners and tenants (with permission) to earn up to £7,500 per year tax-free by renting a furnished room in their main home.

This relief is one of the most generous tax breaks available to UK households.

For example, if you rent a spare bedroom to a lodger and receive £625 per month, you’ll earn exactly £7,500 a year, and potentially pay no tax at all on that income.

For many households, this relief can turn an unused room into a completely tax-efficient source of extra income.

Allowances for Couples, Families and Pensioners

Married, parenting or retired? Tax breaks are available, and many people leave them unclaimed. Check each one below.

Marriage Allowance

If one of you earns less than the £12,570 Personal Allowance and the other is a basic rate taxpayer, you can share some of that unused tax-free allowance. The lower earner transfers £1,260, cutting the higher earner’s tax bill by £252 a year. You must be married or in a civil partnership, and higher-rate and additional-rate taxpayers can’t receive it.

1. Transfer £1,260, saving up to £252: that’s 10% of the Personal Allowance, taxed at the 20% basic rate.
2. Backdating claims up to 4 years: you can claim for up to four previous tax years so that a first-time claim can be worth up to £1,260 in total, the combined saving of £252 a year. Claim for free on GOV.UK. Never pay a third party to do it.

Married Couple’s Allowance

This is the older, more generous version, but only for couples where one partner was born before 6 April 1935.

1. Born before 6 April 1935: the allowance is between £4,530 and £11,700 for 2026/27. It reduces your tax bill by 10% of that amount, so it’s worth £453 to £1,170.
2. You can’t claim it and Marriage Allowance together.

Blind Person’s Allowance

If you’re registered as blind or severely sight impaired, you get extra tax-free income on top of your Personal Allowance. It rises from £3,130 to £3,250 for 2026/27. If you can’t use it all, you can pass the unused part to your spouse or civil partner.

High Income Child Benefit Charge (£60,000–£80,000)

Child Benefit is tax-free, but if the higher earner in your household has adjusted net income over £60,000, HMRC claws it back through a tax charge. You repay 1% of your Child Benefit for every £200 of income between £60,000 and £80,000. At £80,000, you repay it all.

1. It’s based on one person’s income, not the household total.
2. Pension contributions and Gift Aid donations lower your adjusted net income, which can reduce or remove the charge.

Will I Pay Tax on My State Pension?

The State Pension is taxable income. You pay nothing only when your total income stays at or below the £12,570 Personal Allowance.

1. The full new State Pension vs £12,570: the full new State Pension is £241.30 a week, or £12,547.60 a year, so you’re £22.40 under the allowance. There’s almost no room left for other income, such as a workplace pension or interest on savings.
2. What HMRC has said: a joint HM Treasury and HMRC statement says no one whose only income is the full new or basic State Pension, without increments, will pay income tax. The government committed to that for this Parliament. The Chancellor confirmed this holds even when payments exceed the Personal Allowance from April 2027.
3. The catch: the promise covers State Pension only. With the triple lock, the State Pension is expected to pass £12,570 from April 2027. Any other income, or extra State Pension from deferring, can still create a bill

Frequently Asked Questions

What is the tax-free Personal Allowance for 2026/27?

The standard Personal Allowance is £12,570, meaning most people can earn up to this amount before paying Income Tax.

Are tax thresholds frozen, and until when?

Yes. The Personal Allowance (£12,570) and higher-rate threshold (£50,270) remain frozen until April 2031. 

What happens if I earn over £100,000?

Your Personal Allowance is reduced by £1 for every £2 of income above £100,000 and disappears completely at £125,140.

How much can I earn before paying 40% tax?

For taxpayers in England, Wales and Northern Ireland, you start paying the 40% higher rate once your income exceeds £50,270.

What is the dividend allowance for 2026/27?

You can receive £500 of dividend income tax-free each tax year.

Do self-employed people get a Personal Allowance?

Yes. Self-employed individuals generally receive the same £12,570 Personal Allowance as employees.

Will I pay tax on my State Pension?

The State Pension is taxable income, but whether you pay tax depends on your total income and available allowances.

How much can I earn from a side hustle tax-free?

You can earn up to £1,000 a year from casual self-employment or side-hustle activities under the Trading Allowance before needing to pay tax on that income.

Do tax thresholds change every year?

Not necessarily. The government can change thresholds, but they may also remain frozen for several years, as has happened with the current Income Tax thresholds.