UK Tax Rates, Thresholds and Allowances for 2025/26
Updated for the 2025/26 tax year | Expertly reviewed by qualified UK tax professionals
UK Tax Bands 2025/26
Understanding UK tax rates, thresholds and allowances is vital for effective financial planning—whether you're an individual taxpayer, a business owner, or a sole trader. This guide offers a full breakdown of the key rates and thresholds you need to know for the 2025/26 tax year, which runs from 6 April 2025 to 5 April 2026.
Income Tax
What is it?
Income Tax is a tax charged on most types of income including wages, pensions, rental income, and profits from self-employment. HMRC collects this from individuals based on income levels and applies progressive rates across various bands.
Rates for England, Wales & Northern Ireland (2025/26)
| Income Band | 2025/26 Rate | Taxable Income Range |
|---|---|---|
| Personal Allowance | 0% | Up to £12,570 |
| Basic Rate | 20% | £12,571 – £50,270 |
| Higher Rate | 40% | £50,271 – £125,140 |
| Additional Rate | 45% | Over £125,140 |
The Personal Allowance reduces by £1 for every £2 of income over £100,000, disappearing entirely at £125,140.
Scottish Income Tax
What is it?
Residents of Scotland pay income tax under a separate system set by the Scottish Government. It includes more tax bands and aims to make the system more progressive.
| Band Name | Tax Rate | Income Range |
|---|---|---|
| Starter Rate | 19% | £12,571 – £14,732 |
| Basic Rate | 20% | £14,733 – £25,688 |
| Intermediate Rate | 21% | £25,689 – £43,662 |
| Higher Rate | 42% | £43,663 – £125,140 |
| Top Rate | 48% | Over £125,140 |
Dividend Tax
What is it?
Dividend Tax applies to income received from company shares. It’s especially relevant to business owners who pay themselves through dividends. Dividend income has its own set of tax rates, separate from employment income.
| Tax Band | Rate |
|---|---|
| Basic Rate | 8.75% |
| Higher Rate | 33.75% |
| Additional Rate | 39.35% |
The tax-free Dividend Allowance for 2025/26 is £500.
National Insurance Contributions (NICs)
What is it?
NICs fund state benefits like the State Pension, the NHS, and unemployment benefits. Employees, employers, and the self-employed all pay different classes of NICs, depending on their earnings and employment status.
For Employees (Class 1 NICs)
| Band | Employee Rate | Employer Rate |
|---|---|---|
| Up to £12,570 | 0% | 0% |
| £12,571 – £50,270 | 8% | 13.8% |
| Over £50,270 | 2% | 13.8% |
For the Self-Employed (Class 2 & 4 NICs)
| Class | Rate | Notes |
|---|---|---|
| Class 2 | £3.70/week | Profits over £6,725 |
| Class 4 | 6% | Profits £12,570 – £50,270 |
| Class 4 | 2% | Profits over £50,270 |
Capital Gains Tax (CGT)
What is it?
CGT is charged on the profit when you sell or dispose of an asset that has increased in value, such as shares, property (excluding your main home), or business assets.
| Asset Type | Basic Ratepayer | Higher/Additional Ratepayer |
|---|---|---|
| Most Assets | 10% | 20% |
| Residential Property | 18% | 28% |
The CGT Annual Exempt Amount is £3,000 per individual.
Corporation Tax
What is it?
Corporation Tax is paid by UK limited companies on their taxable profits. The rate depends on the size of profits, with marginal relief applying between the lower and upper thresholds.
| Taxable Profits | Rate |
|---|---|
| Up to £50,000 | 19% (Small Profits Rate) |
| £50,001 – £250,000 | Marginal Relief applies |
| Over £250,000 | 25% (Main Rate) |
Value Added Tax (VAT)
What is it?
VAT is a consumption tax applied to most goods and services sold in the UK. Businesses must register for VAT once they cross the VAT registration threshold, currently set at £90,000.
| VAT Type | Rate |
|---|---|
| Standard Rate | 20% |
| Reduced Rate | 5% |
| Zero Rate | 0% |
| Registration Threshold | £90,000 |
Inheritance Tax (IHT)
What is it?
IHT is a tax on the estate (property, money, possessions) of someone who’s died. Tax is usually due if the estate exceeds certain thresholds, though various reliefs and exemptions apply.
| Threshold | Rate |
|---|---|
| Nil-Rate Band | £325,000 – 0% |
| Residence Nil-Rate Band | £175,000 – 0% |
| Above Thresholds | 40% |
Taper relief may reduce IHT for gifts made within 7 years of death.
Pension Contribution Limits
What is it?
Pension contributions are tax-efficient savings towards retirement. Individuals can receive tax relief on contributions up to their annual allowance.
| Limit | Amount |
|---|---|
| Annual Allowance | £60,000 |
| Lifetime Allowance | Abolished (from April 2024) |
Tax relief is given at your marginal tax rate.
Individual Savings Accounts (ISAs)
What is it?
ISAs allow you to earn interest, dividends, and capital gains tax-free. They are a tax-efficient way to save and invest.
| ISA Type | 2025/26 Allowance |
|---|---|
| Adult ISA | £20,000 |
| Junior ISA | £9,000 |
Includes Cash ISAs, Stocks & Shares ISAs, and Lifetime ISAs (for first homes or retirement).
Employment Allowance
What is it?
This allowance allows eligible employers to reduce their National Insurance bill by up to £5,000 per year, helping small businesses lower employment costs.
Making Tax Digital (MTD)
What is it?
Making Tax Digital is HMRC’s initiative to digitise the UK tax system, requiring businesses and landlords to keep digital records and submit updates online.
From April 2026, MTD for Income Tax will apply to self-employed individuals and landlords with annual income over £50,000.
✅ Frequently Asked Questions: UK Tax Rates, Thresholds and Allowances 2025/26
💬 What are the personal income tax rates for 2025/26 in the UK?
For the 2025/26 tax year, UK income tax rates remain unchanged:
Basic Rate: 20% on income from £12,571 to £50,270
Higher Rate: 40% on income from £50,271 to £125,140
Additional Rate: 45% on income above £125,140
Scotland uses different bands under its devolved tax system.
💬 What is the UK tax-free personal allowance for 2025/26?
The standard tax-free Personal Allowance for 2025/26 is £12,570.
It may be reduced for individuals earning over £100,000 and increased if eligible for Blind Person’s Allowance or Marriage Allowance.
💬 Has the National Insurance threshold changed in 2025/26?
Yes. From April 2025:
Class 1 (Employees): No NIC is due on earnings below £12,570
Class 4 (Self-Employed): Profits under £12,570 are exempt
The main rate has dropped to 8% for employees and 6% for the self-employed.
💬 What is the VAT registration threshold for 2025/26?
The VAT registration threshold is £90,000 of taxable turnover in a 12-month period.
Deregistration is possible if turnover falls below £88,000.
💬 What are the capital gains tax rates for 2025/26?
Capital Gains Tax rates are:
10% for basic rate taxpayers
20% for higher/additional rate taxpayers
18%/28% for residential property gains
The annual exemption is £3,000 for individuals.
💬 What is the Corporation Tax rate for 2025/26?
Corporation Tax remains:
19% for companies with profits up to £50,000
25% for profits over £250,000
Marginal Relief applies between these thresholds.
💬 How much can I contribute to a pension tax-free in 2025/26?
You can contribute up to £60,000 per year tax-free under the Annual Allowance.
There is no longer a Lifetime Allowance, abolished from April 2024.
💬 How much can I save in an ISA in 2025/26?
You can save:
Up to £20,000 in an Adult ISA
Up to £9,000 in a Junior ISA
These limits are tax-free and remain unchanged.
💬 What is the Inheritance Tax threshold in 2025/26?
The Inheritance Tax (IHT) nil-rate band is £325,000.
An additional £175,000 residence nil-rate band may apply when passing on a home to direct descendants.
The IHT rate on amounts above these thresholds is 40%.
💬 Are Scottish income tax rates different for 2025/26?
Yes, Scotland has its own income tax bands for non-savings and non-dividend income:
Starter Rate: 19%
Basic: 20%
Intermediate: 21%
Higher: 42%
Top: 48%
These differ from the rest of the UK and are set by the Scottish Government.