The 2026/27 UK tax year, which runs from 6 April 2026 to 5 April 2027, is expected to see a continuation of the government’s policy of freezing many key tax thresholds. While this provides a degree of certainty, the freeze means that as incomes rise with inflation, more individuals and businesses will be drawn into higher tax brackets.
This guide provides an overview of the main rates and thresholds announced for 2026/27, which are essential for effective tax planning by sole traders, limited company directors, employers, and employees.
Who this guide is for:
- Sole traders planning for Self Assessment and payments on account.
- Limited company directors structuring their remuneration through salary and dividends.
Employers and employees managing PAYE and National Insurance obligations.
Income Tax Rates and Bands (England, Wales, and Northern Ireland)
The UK-wide Personal Allowance remains frozen at £12,570. This is the amount of income you can earn before you start paying Income Tax.
The Personal Allowance is reduced by £1 for every £2 of “adjusted net income” over £100,000. This means the allowance is fully withdrawn for individuals with an income of £125,140 or more.
The Income Tax rates and bands for England, Wales, and Northern Ireland are as follows:
| Band | Taxable Income | Tax Rate |
| Basic Rate | £12,571 to £50,270 | 20% |
| Higher Rate | £50,271 to £125,140 | 40% |
| Additional Rate | Over £125,140 | 45% |
Scottish Income Tax
It is important to note that Scotland sets its own Income Tax rates and bands for non-savings and non-dividend income. While the UK-wide Personal Allowance applies, the thresholds and rates for Scottish taxpayers differ from those in the rest of the UK.
Dividend Tax (UK-wide)
For directors and shareholders, the tax treatment of dividends is a key consideration.
Dividend Allowance: The tax-free Dividend Allowance is £500. This allowance does not reduce total income for the purposes of determining your tax band.
Dividend Tax Rates: Dividends received above the £500 allowance are taxed at the following rates:
- 8.75% for basic rate taxpayers.
- 33.75% for higher rate taxpayers.
- 39.35% for additional rate taxpayers.
National Insurance Contributions (NICs)
The rates and thresholds for National Insurance for 2026/27 are outlined below.
Employees (Class 1 NICs)
| Band | Taxable Income | Tax Rate |
| Basic Rate | £12,571 to £50,270 | 20% |
| Higher Rate | £50,271 to £125,140 | 40% |
| Additional Rate | Over £125,140 | 4Employees (Class 1 NICs) Earnings per year NICs Rate Up to £12,570 0% £12,570.01 to £50,270 8% Over £50,270 2% |
Employers (Class 1 NICs)
Employers pay Class 1 NICs at a rate of 13.8% on an employee’s earnings above the Secondary Threshold of £9,100 per year (£175 per week).
Self-Employed (Class 2 and Class 4 NICs)
Class 4 NICs:
| Annual Profits | NICs Rate |
| £12,570 to £50,270 | 6% |
| Over £50,270 | 2% |
Class 2 NICs: Compulsory Class 2 NICs were abolished from 6 April 2024.
- Self-employed individuals with profits above £12,570 are treated as having made contributions, protecting their entitlement to the State Pension and other benefits without needing to make a payment.
- Those with profits below the Small Profits Threshold (£6,725 in 2024/25) can make voluntary Class 2 contributions to protect their National Insurance record.
Corporation Tax
For limited companies, Corporation Tax is charged on annual profits. The rates are tiered:
- Small Profits Rate: 19% on profits up to £50,000.
- Main Rate: 25% on profits over £250,000.
- Marginal Relief: Companies with profits between £50,001 and £250,000 can claim Marginal Relief, resulting in a gradual increase in the effective tax rate from 19% to 25%.
Value Added Tax (VAT)
The key VAT thresholds are:
- Registration Threshold: Businesses must register for VAT if their VAT-taxable turnover exceeds £90,000 in a rolling 12-month period.
- Deregistration Threshold: A business can apply to deregister if its taxable turnover is expected to be £88,000 or less over the next 12 months.
The main VAT rates remain:
Zero Rate: 0%
Standard Rate: 20%
Reduced Rate: 5%
Disclaimer:
The rates and thresholds provided are based on government announcements for the 2026/27 tax year and are correct at the time of writing. These figures are subject to change in future UK Budgets or fiscal statements.
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