Income Tax 2026/27 – United Kingdom
Thresholds frozen until April 2031. Personal allowance £12,570 with taper above £100,000 creating 60% effective rate. New dividend and savings tax increases from 2026/2027 to narrow gap between employment and investment income.
Income Tax 2026/27
Thresholds frozen until April 2031. Personal allowance £12,570 with taper above £100,000 creating 60% effective rate. New dividend and savings tax increases from 2026/2027 to narrow gap between employment and investment income.
Tax Rates England, Wales, NI
Tax-free. Reduced by £1 for every £2 earned above £100,000. Fully removed at £125,140 creating effective 60% marginal rate between £100,000-£125,140.
20% on taxable income £12,571-£50,270 (£37,700 above personal allowance). Applies to employment, self-employment, pension income. Frozen since 2021/22.
40% on income £50,271-£125,140. Threshold frozen causing fiscal drag as more taxpayers pushed into higher rate through wage inflation.
45% on income above £125,140. Threshold reduced from £150,000 in April 2023. Affects higher earners significantly.
Scottish Income Tax Rates
Scotland has separate rates. 19% on taxable income £12,571-£15,397. Scottish taxpayers identified by 'S' tax code. More progressive than rest of UK.
20% Scottish basic rate. Note different thresholds from England/Wales/NI create complex planning for those moving between Scotland and rest of UK.
Additional Scottish band at 21%. Creates more gradual progression but means middle earners may pay more tax than in England.
Scottish higher rate 42% (vs 40% England). Applies earlier than rest of UK higher rate threshold.
Unique Scottish band. 45% rate kicks in much earlier than rest of UK's additional rate.
Scotland's top rate 48% vs 45% in rest of UK. Highest marginal rate in UK.
Dividend Tax Rates from April 2026
Increased from 8.75%. For basic rate taxpayers. First £500 covered by dividend allowance. Significant 2% increase announced Autumn Budget 2025.
Increased from 33.75%. For higher rate taxpayers. 2% increase makes dividend extraction less attractive vs salary for many directors.
For additional rate taxpayers. Rate unchanged but still very high. Combined with Corporation Tax 25% means significant double taxation on profits.
Only first £500 dividends tax-free. Down from £2,000 in 2022/23, £1,000 in 2023/24. Frozen at £500 for 2026/27. Affects small shareholders significantly.
Savings Tax Rates from April 2027
0% starting savings rate on savings income up to £5,000, but only available if non-savings income below personal allowance. Rarely applies in practice.
Basic rate taxpayers: £1,000 tax-free savings income. Higher rate: £500. Additional rate: £0. Applies to bank interest, bonds, peer-to-peer lending.
Increasing from 20% in April 2027. 2 percentage point rise announced Budget 2025. Applies to savings income above PSA for basic rate taxpayers.
Increasing from 40% in April 2027. Matches Scottish higher rate. Makes tax-efficient savings wrappers like ISAs more valuable.
Increasing from 45% in April 2027. Very high marginal rate on savings for top earners. Strong incentive to use ISA allowances.
Property Income Tax from April 2027
New separate property income basic rate from April 2027. Increases from current 20%. Part of government policy to narrow gap between employment and asset income.
New property income higher rate from April 2027. Up from 40%. Affects landlords significantly alongside existing mortgage interest restrictions.
New property income additional rate. Up from 45%. Combined with restrictions on deductions makes buy-to-let less attractive for higher earners.
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