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.
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.
The income tax bands for 2025/26 (England, Wales and Northern Ireland) are as follows:
| Band | Taxable income | Rate |
|---|---|---|
| Personal allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 – £50,270 | 20% |
| Higher rate | £50,271 – £125,140 | 40% |
| Additional rate | Above £125,140 | 45% |
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 By the time income reaches £125,140, the personal allowance is completely withdrawn.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.
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):
| Band | Dividend tax rate 2025/26 |
|---|---|
| Basic rate taxpayers | 8.75% |
| Higher rate taxpayers | 33.75% |
| Additional rate taxpayers | 39.35% |
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 type | Personal 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)
| Earnings | Employee NI rate |
|---|---|
| Up to £12,570 per year (Primary Threshold) | 0% |
| £12,571 – £50,270 per year | 8% |
| 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 secondary threshold (the point at which employers begin paying NI) dropped from £9,100 to £5,000 per year
- The employer NI rate rose from 13.8% to 15%
- The Employment Allowance increased from £5,000 to £10,500 and is now available to all eligible employers regardless of their prior-year NI bill
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.
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 band | Class 4 NI rate |
|---|---|
| Below £12,570 (Lower Profits Limit) | 0% |
| £12,571 – £50,270 | 6% |
| Above £50,270 | 2% |
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:
| Profits | Rate | Note |
|---|---|---|
| Up to £50,000 | 19% | Small profits rate |
| £50,001 – £250,000 | 19% to 25% | Marginal relief applies |
| Above £250,000 | 25% | 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).
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 rate | Applies to |
|---|---|
| 20% Standard rate | Most goods and services |
| 5% Reduced rate | Domestic energy, children's car seats, some renovations |
| 0% Zero rate | Most food, children's clothing, books, public transport, new residential buildings |
| Exempt | Financial 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)
| Taxpayer | Rate on gains |
|---|---|
| Basic rate taxpayers | 18% |
| Higher and additional rate taxpayers | 24% |
| Trusts and personal representatives | 24% |
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:
| Period | BADR CGT rate |
|---|---|
| Pre 30 October 2024 | 10% |
| 30 October 2024 – 5 April 2025 | 10% |
| 6 April 2025 – 5 April 2026 (current) | 14% |
| From 6 April 2026 | 18% |
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
| Allowance | Amount | Conditions |
|---|---|---|
| Nil-Rate Band (NRB) | £325,000 | Available to everyone. Frozen since 2009, now until at least April 2031. |
| Residence Nil-Rate Band (RNRB) | £175,000 | Only 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 person | Up to £500,000 | NRB + RNRB, where the RNRB conditions are met. |
| Combined for married couple / civil partners | Up to £1,000,000 | Transferable 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
- Pensions and IHT (from April 2027): Unused pension pots and death benefits will be brought within the scope of IHT from 6 April 2027. This is a significant change for estate planning — anyone with substantial pension savings should review their position now.
- Business Property Relief and Agricultural Property Relief (from April 2026): From 6 April 2026, 100% relief on qualifying business and agricultural property will be capped at a combined £2.5 million per person (transferable between spouses, giving up to £5 million per couple). Assets above this cap will attract 50% relief — meaning an effective IHT rate of 20% on value above the cap. This has been confirmed in the Finance Act 2026.
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.
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 type | Annual 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
| Date | What is due |
|---|---|
| 6 April 2025 | Start of the 2025/26 tax year. New rates and thresholds take effect. |
| 5 October 2025 | Deadline to register for self-assessment if you are newly required to file a return for 2024/25. |
| 31 October 2025 | Deadline for paper self-assessment returns for 2024/25. |
| Within 60 days of completion | CGT return and payment due on residential property gains (rolling deadline throughout the year). |
| 19 ⁄ 22 of each month | PAYE and NI due to HMRC (paper / electronic respectively) for the prior payroll month. |
| 31 January 2026 | Online 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 2026 | End of the 2025/26 tax year. Last date to use 2025/26 allowances (ISA, CGT exempt amount, pension contributions, annual gift exemption). |
| 6 April 2026 | BADR 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.