Individuals
Income Tax Rates 2026/27
For most taxpayers in England, Wales, and Northern Ireland, headline Income Tax rates remain unchanged. However, the frozen allowances mean you are likely to pay more tax. As wages rise with inflation, a larger portion of the population will naturally be drawn into higher tax bands, a process known as fiscal drag.
| Income Tax Band | Taxable Income (Above £12,570 Allowance) | 2025/26 Rate | 2026/27 Rate |
| Tax-free allowance | £12,570 | 0% | 0% |
| Basic rate | £12,571 to £50,270 | 20% | 20% |
| Higher rate | £50,271 to £125,140 | 40% | 40% |
| Additional rate | Over £125,140 | 45% | 45% |
Student Loans
The earnings threshold for student loan repayment has been increased on some but not all plans, as summarised below.
| Student Loan Plan | 2025/26 repayment threshold | 2026/27 repayment threshold |
| Plan 1 (Pre-2012) | £26,065 | £26,900 |
| Plan 2 (Post-2012) | £28,470 | £29,385 |
| Plan 4 (Scottish) | £32,745 | £33,795 |
| Postgraduate (Plan 3) | £21,000 | £21,000 |
| Plan 5 | £25,000 | £25,000 |
Note: The government is capping the maximum interest rates on Plan 2 and 3 student loans at 6% from 1st September, for the 2026/27 academic year.
National Living Wage & National Minimum Wage 2026/27
The National Living and National Minimum Wage has increased for the 2026/27 tax year, summarised below.
| Age Category / Worker Classification | 2025/26 | 2026/27 | Annual Increase |
| National Living Wage (21 and over) | £12.21 | £12.71 | 4.1% |
| National Minimum Wage - 18-20 year old rate | £10.00 | £10.85 | 8.5% |
| National Minimum Wage - 16-17 year old rate | £7.55 | £8.00 | 6.0% |
| Apprentice rate | £7.55 | £8.00 | 6.0% |
| Accommodation offset* | £10.66 | £11.10 | 4.1% |
*The legal limit on how much an employer can count towards an employee’s National Minimum Wage (NMW) when providing living accommodation
Dividend Tax Rates 2026/27
There have been changes to the Dividend tax rates for the 2026/27 tax year. See our table below. For more information, read our article How are dividends taxed and what are the rates?
| Dividends | 2025/26 | 2026/27 |
| The tax-free dividend allowance | £500 | £500 |
| Basic-rate taxpayers % on dividends | 8.75% | 10.75% |
| Higher-rate taxpayers % on dividends | 33.75% | 35.75% |
| Additional-rate taxpayers % on dividends. | 39.35% | 39.35% |
Inheritance Tax 2026/27
The tax-free threshold remains at £325,000 and is frozen until April 2031. The additional rate that applies to property passed directly to a descendant remains at £175,000, meaning the total that can be passed on to direct descendants (including property) remains at £500,000.
| Inheritance Tax | 2025/26 | 2026/27 | Increase | Total (including tax-free threshold) |
| Threshold on property passed directly to descendants | £175,000 | £175,000 | £0 | £500,000 |
Pensions and Inheritance Tax - Changes coming in 2027
A significant change is coming to how your retirement savings are treated upon your death. If you are looking for ways to pass on your wealth, it is important to understand how these new rules might affect your estate. Historically, pension savings have been kept completely outside of your taxable estate; however, new rules from 6th April 2027 mean the value of most unused pension savings and death benefits will be subject to Inheritance Tax.
Although the new legislation does not formally take effect until April 2027, the current 2026/27 tax year is a critical window for individuals to review their assets and make preemptive plans. We explain this in more detail in our article 'Pensions to be subject to inheritance tax'.
Auto-enrolment
The minimum amount that you need to pay into your workplace's auto-enrolment has remained the same, as summarised below.
| Auto-enrolment | 2025/26 | 2026/27 |
| Employee minimum | 5% | 5% |
| Employer contribution | 3% | 3% |
| Total contribution | 8% | 8% |
Capital Gains Tax 2026/27
Capital Gains Tax (CGT) rates for individuals remain 18% (basic rate) and 24% (higher rate). The annual tax-free exemption is frozen at £3,000. The exemption for most trusts is similarly frozen at £1,500. If you don't make full use of your CGT allowance in a given tax year, you cannot carry it forward to the next.
| Capital Gains Tax (CGT) | 2025/26 | 2026/27 |
| Annual exemption from capital gains (Individuals) | £3,000 | £3,000 |
| Annual exemption from capital gains (Most Trusts) | £1,500 | £1,500 |
| As a basic rate taxpayer | 18% | 18% |
| As a higher rate taxpayer | 24% | 24% |
Note: Trustees and personal representatives pay a flat rate of 24%
Businesses
Corporation Tax & VAT Threshold 2026/27
For business owners, the headline rates for Corporation Tax remain fundamentally unaltered for the 2026/27 tax year. There are also no changes to the primary Value Added Tax (VAT) thresholds this year
| Corporate Tax & VAT Element | 2025/26 rate / limit |
2026/27 rate / limit
|
| Small Profits Rate (Profits strictly under £50,000) | 19% | 19% |
| Main Rate (Profits over £250,000) | 25% | 25% |
| VAT Registration Threshold | £90,000 | £90,000 |
| VAT Deregistration Threshold | £88,000 | £88,000 |
Inheritance Tax 2026/27
From 6th April 2026, for Agricultural and Business relief, the 100% IHT relief is strictly capped at a combined lifetime limit of £2.5 million per individual. Assets exceeding this value are relegated to a 50% relief rate.
Making Tax Digital - New rules for 2026/27
The 2026/27 tax year marks a major shift in how many people report their income to HM Revenue & Customs (HMRC). The government has launched the operational phase of its Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) initiative.
If you run your own business or earn money from property, it is important to understand how these new reporting rules impact you.
Who is affected?
From 6th April 2026, it is a strict legal requirement for sole traders and landlords to use the new digital system if their combined qualifying gross income (total turnover before expenses) exceeds £50,000. Landlords operating through a limited company are currently exempt from these rules.
What are the new rules?
Instead of filing a single, retrospective annual tax return, affected individuals must use HMRC-compatible software to keep real-time digital records of their income and expenses.
- Quarterly updates - You will need to submit mandatory updates directly to HMRC every three months to provide a rolling view of your business performance. At the end of the tax year, you must also file an End of Period Statement (EOPS) and a final digital declaration to confirm your ultimate tax liability.
- Penalties - A new points-based penalty system is being introduced for non-compliance. However, HMRC has indicated a temporary "soft landing" regarding penalty points for late quarterly updates during the inaugural 2026/27 tax year to help people adjust. Be aware that severe financial penalties will still be enforced for missing your final annual declaration or paying your tax late.
The scheme is set to expand in the coming years. It will capture individuals earning over £30,000 from April 2027, and those earning over £20,000 from April 2028, ensuring the vast majority of the self-employed economy is digitised by the end of the decade.
Capital allowances and writing-down reductions
When a business buys assets such as equipment, machinery, or business vehicles, it can normally deduct some or all of their value from its profits before paying tax. This is done through a mechanism known as capital allowances. The 2026/27 tax year brings a reduction to the relief available through the writing-down allowance, summarised below.
| Type of business | 2025/26 rate | 2026/27 rate | Effective from |
| Companies | 18% | 14% | 1st April 2026 |
| Unincorporated businesses (Sole traders & Partnerships) | 18% | 14% | 6th April 2026 |
If your business already holds significant assets in its capital allowances pools, this rate cut means you can expect to receive your tax relief at a much slower pace going forward.
Business Asset Disposal Relief (BADR)
If you are a sole trader, a partner in a business partnership, or a company director looking to sell all or part of your enterprise, you need to be aware of incoming changes to Business Asset Disposal Relief (BADR). BADR allows qualifying business owners to apply a reduced Capital Gains Tax (CGT) rate to the first £1 million of lifetime gains made upon the sale of their business, provided all relevant conditions are met.
| Business Asset Disposal Relief (BADR) | 2025/26 rate |
2026/27 rate
|
| BADR rate | 14% | 18% |
Because the rate has increased, business owners will face a higher overall Capital Gains Tax bill when selling qualifying assets than in previous years. If you are planning an exit strategy, succession plan, or a business restructure, understanding this 18% rate is an important part of your financial planning.
VAT relief for donations
If you run a business, donating surplus goods to charity is set to become much simpler and more cost-effective from 1st April 2026. Under the new rules, qualifying donations to charities will be completely exempt from VAT, regardless of whether the charity decides to sell, use, or give them directly to people in need. This change removes the red tape and unexpected tax bills that previously penalised businesses for giving away stock, making it much easier to support good causes rather than simply throwing surplus goods away.
Savings and Investments
ISA Limits 2026/27
While the overall annual ISA allowance remains at £20,000, significant changes are due to take place in the 2027/28 tax year. From 6th April 2027, new rules will limit how much younger savers (defined as anyone under 65) can put into a Cash ISA. Currently, you can put your entire £20,000 annual allowance into a tax-free Cash ISA, regardless of your age. However, from the 2027/28 tax year, anyone under 65 will see their annual Cash ISA limit reduced to £12,000.
This means that if you are under 65 and wish to use your full £20,000 tax-free allowance from April 2027 onwards, the remaining £8,000 would need to be placed into an alternative account, such as a Stocks and Shares ISA or an Innovative Finance ISA. For savers aged 65 and over, the rules will not change, meaning they can continue to put the full £20,000 into a Cash ISA if they prefer.
Additionally, younger savers should note that the transitional rules allowing 16 and 17-year-olds to open and subscribe to an adult Cash ISA officially ended in April 2026. The minimum age for opening all new adult ISAs is now firmly set at 18, though the Junior ISA allowance remains completely unaffected.
| Types of ISA | 2026/27 | 2027/28 |
Difference (26/27 to 27/28)
|
| Cash ISA (Under 65s) | £20,000 | £12,000 |
£8,000 decrease
|
| Cash ISA (65 and over) | £20,000 | £20,000 | No change |
| Stocks and Shares ISA | £20,000 | £20,000 | No change |
| Innovative Finance ISA | £20,000 | £20,000 | No change |
| Lifetime ISA | £4,000 | £4,000 | No change |
| Junior ISA | £9,000 | £9,000 | No change |
If you are interested in finding out more about ISAs, then check out our article on the best and cheapest investment ISAs for beginners.
£200 Pension Cashback Offer
Make a qualifying deposit or transfer a pension to our partner Interactive Investor.
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- Terms and Fees apply, Capital at risk
- New & Existing customers opening a SIPP
- Offer ends 30th June 2026
Before starting your transfer, check you won't lose any valuable benefits (such as guaranteed annuity rates or a lower protected pension age) and find out what exit fees you might have to pay
