Key Changes at a Glance
Income Tax
The tax-free personal allowance for 2026/27 remains at £12,570, and the higher and additional rate thresholds in England, Wales and Northern Ireland are also unchanged. The Autumn Budget 2024 extended the freeze on all these amounts until at least April 2031, making it a full decade since most of them were last adjusted.
This freeze means that as wages rise with inflation, more people are being pulled into higher tax bands. This effect, known as fiscal drag, means you keep less of any pay rise you receive. The Office for Budget Responsibility estimates that around 4 million more people will be paying income tax by 2028/29 compared to 2021/22 as a direct result of frozen thresholds.
| Item | 2025/26 | 2026/27 | Change |
|---|---|---|---|
| Personal allowance | £12,570 | £12,570 | Frozen |
| Basic rate band | £12,571 - £50,270 | £12,571 - £50,270 | Frozen |
| Basic rate | 20% | 20% | Frozen |
| Higher rate band | £50,271 - £125,140 | £50,271 - £125,140 | Frozen |
| Higher rate | 40% | 40% | Frozen |
| Additional rate | 45% | 45% | Frozen |
Scotland continues to set its own income tax rates and bands. For 2026/27, the Scottish rates range from 19% (starter rate) up to 48% (top rate), with an advanced rate of 45% on income between £75,001 and £125,140.
Dividend Tax
This is one of the biggest changes for the 2026/27 tax year. Dividend tax rates are rising by 2 percentage points for basic and higher rate taxpayers.
The tax-free dividend allowance remains at £500 for 2026/27. However, the rates of tax on dividend income above this amount are increasing. This change, announced in the Autumn Budget 2024, is designed to align more closely with the employer NI increase and affects anyone receiving dividends outside of an ISA, including company directors who pay themselves through dividends.
| Item | 2025/26 | 2026/27 | Change |
|---|---|---|---|
| Dividend allowance | £500 | £500 | Frozen |
| Basic rate | 8.75% | 10.75% | +2% |
| Higher rate | 33.75% | 35.75% | +2% |
| Additional rate | 39.35% | 39.35% | Frozen |
For a basic rate taxpayer receiving £10,000 in dividends, the tax bill rises from approximately £831 to £1,021, an increase of £190 per year. For higher rate taxpayers receiving the same amount, the increase is also around £190. If you are a company director, it is worth reviewing your salary and dividend split with your accountant before the new tax year begins.
National Insurance
Employee NI rates and thresholds are unchanged for 2026/27. The main rate remains at 8% on earnings between £12,570 and £50,270, with 2% on earnings above that. The big change to employer NI (the rate rising from 13.8% to 15% and the threshold dropping from £9,100 to £5,000) took effect in April 2025 and continues into 2026/27.
| Item | 2025/26 | 2026/27 | Change |
|---|---|---|---|
| Employee rate (main) | 8% | 8% | Frozen |
| Employee rate (upper) | 2% | 2% | Frozen |
| Primary threshold | £12,570/yr | £12,570/yr | Frozen |
| Upper earnings limit | £50,270/yr | £50,270/yr | Frozen |
| Employer rate | 15% | 15% | Frozen |
| Employer threshold | £5,000/yr | £5,000/yr | Frozen |
| Employment Allowance | £10,500 | £10,500 | Frozen |
For the self-employed, Class 4 NICs remain at 6% on profits between £12,570 and £50,270, and 2% above that. Class 2 NICs are now voluntary only, payable at £3.65 per week for those earning below the Small Profits Threshold of £7,105.
Capital Gains Tax
The CGT annual exemption stays at £3,000 for 2026/27. Standard CGT rates are unchanged at 18% (basic rate) and 24% (higher/additional rate). However, the rate for disposals qualifying for Business Asset Disposal Relief (BADR) or Investors Relief increases from 14% to 18%, completing the phased increase announced in the Autumn Budget 2024.
| Item | 2025/26 | 2026/27 | Change |
|---|---|---|---|
| Annual exemption | £3,000 | £3,000 | Frozen |
| Basic rate | 18% | 18% | Frozen |
| Higher/additional rate | 24% | 24% | Frozen |
| BADR rate | 14% | 18% | +4% |
| Investors Relief rate | 14% | 18% | +4% |
| BADR lifetime limit | £1m | £1m | Frozen |
ISA Allowances
2026/27 is the last year you can put up to £20,000 into a Cash ISA. From April 2027, the Cash ISA limit drops to £12,000 for those aged under 65.
The total ISA allowance remains at £20,000 for 2026/27, split across Cash ISAs, Stocks and Shares ISAs, Innovative Finance ISAs, and Lifetime ISAs (up to £4,000 of the total). Neither income tax nor capital gains tax applies to money held within ISAs.
From April 2027, the government plans to restrict the Cash ISA limit to £12,000 for people aged 64 and under. The overall £20,000 limit will remain, meaning you could put £12,000 in a Cash ISA and £8,000 in a Stocks and Shares ISA. This makes the 2026/27 tax year the final opportunity to maximise your Cash ISA balance at the full £20,000 limit. If you have savings you want to shelter from tax, consider acting before 5 April 2027.
| Item | 2025/26 | 2026/27 | Change |
|---|---|---|---|
| Total ISA allowance | £20,000 | £20,000 | Frozen |
| Cash ISA limit | £20,000 | £20,000 | Dropping to £12k in 2027 |
| Lifetime ISA limit | £4,000 | £4,000 | Frozen |
| Personal Savings Allowance (basic) | £1,000 | £1,000 | Frozen |
| Personal Savings Allowance (higher) | £500 | £500 | Frozen |
Pensions
The annual allowance for pension contributions remains at £60,000 for 2026/27 (or 100% of earnings if lower). The money purchase annual allowance stays at £10,000, and the tapered annual allowance threshold remains at £260,000. The lifetime allowance was abolished from April 2024 and is not returning.
The State Pension continues to benefit from the triple lock. The full new State Pension for 2026/27 is expected to rise in line with the highest of earnings growth, CPI inflation, or 2.5%. Auto-enrolment minimum contributions remain at 8% of qualifying earnings (5% employee, 3% employer).
| Item | 2025/26 | 2026/27 | Change |
|---|---|---|---|
| Annual allowance | £60,000 | £60,000 | Frozen |
| Money purchase AA | £10,000 | £10,000 | Frozen |
| Tapered AA threshold | £260,000 | £260,000 | Frozen |
| Minimum AA (tapered) | £10,000 | £10,000 | Frozen |
| Lifetime allowance | Abolished | Abolished | N/A |
Inheritance Tax
The IHT nil-rate band remains frozen at £325,000, and the residence nil-rate band stays at £175,000. Both are now frozen until April 2031. By that point, the main nil-rate band will have been unchanged for 21 years.
From 6 April 2026, Agricultural Relief and Business Relief are capped at £2.5 million per individual. Assets above this limit receive only 50% relief instead of 100%. This is a significant change for farmers and business owners.
| Item | 2025/26 | 2026/27 | Change |
|---|---|---|---|
| Nil-rate band | £325,000 | £325,000 | Frozen |
| Residence nil-rate band | £175,000 | £175,000 | Frozen |
| IHT rate | 40% | 40% | Frozen |
| Agricultural/Business Relief cap | No cap | £2.5m | New cap |
National Minimum Wage
The National Living Wage (for workers aged 21 and over) rises to £12.21 per hour from April 2026. The 18-20 rate sees a significant increase to £10.00 per hour, continuing the government's aim to narrow the gap between age bands.
| Item | 2025/26 | 2026/27 | Change |
|---|---|---|---|
| 21 and over (NLW) | £12.21/hr | £12.21/hr | Frozen |
| 18-20 year olds | £10.00/hr | £10.00/hr | Frozen |
| Under 18 | £7.55/hr | £7.55/hr | Frozen |
| Apprentice rate | £7.55/hr | £7.55/hr | Frozen |
Student Loans
Student loan repayment thresholds for 2026/27 are confirmed as follows. Plan 2 borrowers (those who started university in England or Wales from September 2012) see their threshold remain at £27,295. The newer Plan 5 (from September 2023) threshold is £25,000.
| Item | 2025/26 | 2026/27 | Change |
|---|---|---|---|
| Plan 1 threshold | £24,990 | £25,000 | +£10 |
| Plan 2 threshold | £27,295 | £27,295 | Frozen |
| Plan 4 (Scotland) | £31,395 | £31,395 | Frozen |
| Plan 5 threshold | £25,000 | £25,000 | Frozen |
| Postgraduate loan | £21,000 | £21,000 | Frozen |
| Repayment rate | 9% | 9% | Frozen |
Stamp Duty
There are no further changes to Stamp Duty Land Tax rates for 2026/27. The rates that took effect from 1 April 2025 continue: the nil-rate band for standard purchases is £125,000, the first-time buyer threshold is £300,000, and the additional property surcharge remains at 5%. In Scotland, Land and Buildings Transaction Tax (LBTT) rates also remain unchanged.
Making Tax Digital
Making Tax Digital for Income Tax starts from April 2026 for the first wave of taxpayers.
From April 2026, self-employed individuals and landlords with gross income exceeding £50,000 must keep digital records and submit quarterly updates to HMRC using compatible software. A second wave, covering those with income above £30,000, follows from April 2027.
If you are in the first wave, you should already have received a letter from HMRC. You will still file your 2025/26 tax return in the usual way by 31 January 2027, but from 6 April 2026 onwards you must use MTD-compatible software to maintain your records and submit quarterly updates.
Other Changes
Home Working Tax Relief Removed
From 6 April 2026, employees can no longer claim tax relief from HMRC for the additional costs of working from home (the £6 per week flat rate claim). Employers can still reimburse employees tax-free for home working costs, but if your employer does not offer this, you will no longer be able to claim the relief directly.
Tax-Free Employer Reimbursements
In positive news, from April 2026 employers can reimburse employees tax-free for flu vaccines, eye tests, and home-working equipment. Previously, the employer generally had to pay for these items directly to avoid tax complications.
Salary Sacrifice Pension Changes
There are changes to how salary sacrifice pension contributions interact with National Insurance from April 2026. Employers should review their pension arrangements to ensure compliance with the updated rules.
Your Action Plan Before 6 April
With the tax year ending on 5 April 2026, here are the key actions to consider before the new rules take effect:
Sources
Disclaimer: This article is for general information purposes only and does not constitute financial or tax advice. While we have taken care to ensure accuracy based on published HMRC rates and government announcements, you should consult a qualified tax adviser for advice specific to your circumstances. Rates and thresholds are subject to change. Last updated 26 February 2026.