Tax Thresholds for the UK in the 2025/26 Tax Year

Tax planning is a key element of financial health — whether you’re an employee, a business owner, a pensioner or just someone keen to keep more of your earnings. With the tax year beginning for many in the UK on 6 April 2025, the 2025/26 tax year brings both familiar rates and important thresholds to note. This guide will walk you through everything you need to know about tax thresholds for 2025/26 — what the numbers are, how they apply, what’s changed (and what has not changed), and how you can optimize your tax position.

1. What is a “tax threshold”?

Before diving into the specifics, let’s define what we mean by “tax threshold.”

A tax threshold is essentially an income level at which a certain tax rate starts (or changes) or a tax relief/allowance begins or ends. For example:

• The personal allowance threshold is the income up to which you pay no income tax.
• A higher-rate threshold marks the point at which the next (higher) tax rate begins to apply to your income.
• Some thresholds are also used for things like National Insurance contributions (NICs), savings tax, dividend tax, allowances, etc.

Understanding the thresholds means you can better estimate your take-home pay, plan for pay rises, pension contributions, or other financial moves.

2. Key UK income tax thresholds and bands for 2025/26

England, Wales & Northern Ireland

For the 2025/26 tax year the main income tax bands (for non-Scottish taxpayers) are:

Threshold / Band	Taxable income	Tax rate
Personal Allowance	£0 to £12,570	0% (no income tax) (House of Commons Library)
Basic rate band	£12,571 to £50,270	20% (House of Commons Library)
Higher rate band	£50,271 to £125,140	40% (GOV.UK)
Additional rate band	Over £125,140	45% (GOV.UK)

So in essence:

• You pay no income tax on your first £12,570 (if your income is simple and you’re eligible).
• You pay 20% on income from £12,571 up to £50,270.
• You pay 40% on income above £50,270 up to £125,140.
• You pay 45% on income over £125,140.

Important note: The personal allowance is tapered away for incomes over £100,000. (PwC Tax Summaries)

Scotland

If you’re a Scottish taxpayer (i.e., resident in Scotland for tax purposes), the bands differ:

Band	Taxable income	Rate
Personal Allowance	£0 to £12,570	0% (mygov.scot)
Starter rate	£12,571 to £15,397	19% (mygov.scot)
Scottish basic	£15,398 to £27,491	20% (mygov.scot)
Intermediate rate	£27,492 to £43,662	21% (mygov.scot)
Higher rate	£43,663 to £75,000	42% (mygov.scot)
Advanced rate	£75,001 to £125,140	45% (mygov.scot)
Top rate	Over £125,140	48% (mygov.scot)

Observations

• The thresholds (for England, Wales & NI) have not changed from 2024/25 to 2025/26. (House of Commons Library)
• The personal allowance remains at £12,570 for 2025/26. (wesleyan.co.uk)
• The government has kept the higher rate and additional rate thresholds unchanged for now.
• In Scotland there is some movement in the lower bands (starter, basic) though the top bands remain largely frozen. (mygov.scot)

3. Why have thresholds been frozen and what’s the impact?

The freeze on thresholds

A key policy issue is that many of these thresholds have been frozen rather than increasing in line with inflation or wage increases. This means that over time more people may slip into higher tax bands even if their real incomes don’t increase significantly — a phenomenon often called “fiscal drag”. (The Times)

For example: the personal allowance has been £12,570 since April 2022 (and will stay there until at least April 2028) even though cost of living and wages have risen. (House of Commons Library)

Impact of fiscal drag

• If you receive a pay rise to keep pace with inflation or career progression, you may find yourself taxed at a higher rate without any formal change to tax rates.
• More people are being pulled into the higher 40% rate band. For example, it’s estimated that in 2025/26 the number of higher-rate taxpayers will exceed 7 million — driven by the frozen thresholds. (The Guardian)
• For those earning over £100,000, the tapering of the personal allowance means the effective marginal tax rate can reach 60% (because for every £2 of extra earnings above £100,000 you lose £1 of allowance). (PwC Tax Summaries)

Why is the government doing this?

• Freezing thresholds raises additional tax revenue without increasing headline tax rates.
• It’s politically easier than raising tax rates directly (which would be visible).
• However, critics argue it is a stealth tax — people end up paying more in tax because thresholds don’t move rather than because rates go up.

What this means for you

• Be aware: even if your salary remains the same, inflation or bonus increases may push you into a higher bracket.
• Planning becomes more important — pension contributions, salary sacrifice, tax-efficient investments become more relevant.
• Think ahead: if you expect higher earnings this year, know what bracket you’ll be in and what allowances you may lose.

4. All the major thresholds and allowances you should know

Here are key thresholds and allowances for 2025/26 — beyond just the main income tax bands. Understanding these gives a fuller picture of your tax position.

Personal Allowance

• For 2025/26, it remains £12,570 for most individuals. (House of Commons Library)
• If your adjusted net income exceeds £100,000, your personal allowance is reduced by £1 for every £2 of income above that. So if your income is £125,140 or more, your personal allowance becomes zero. (PwC Tax Summaries)
• This tapering means higher earners may face very high marginal rates (effectively 60% in some cases) until the allowance drops to zero. (wesleyan.co.uk)

Marriage Allowance

• If one spouse/civil partner has income below the personal allowance and the other is a basic-rate taxpayer, the lower earner can transfer up to £1,260 of their allowance to the other. (House of Commons Library)

Savings and Dividend Allowances

• Personal Savings Allowance (PSA):
  • Basic-rate taxpayers: up to £1,000 interest tax-free. (thepfs.org)
  • Higher-rate taxpayers: up to £500 interest tax-free. (thepfs.org)
  • Additional-rate taxpayers: no PSA. (thepfs.org)
• Dividend Allowance: For 2025/26 it remains at £500 tax-free dividends. (wesleyan.co.uk)
• Dividend tax rates for 2025/26:
  • Basic rate: 8.75%
  • Higher rate: 33.75%
  • Additional rate: 39.35% (wesleyan.co.uk)

Capital Gains Tax (CGT) allowances

• While this is not strictly part of the “income tax thresholds” discussion, CGT allowances and thresholds may affect taxpayers with investment assets — and some changes are being made which interact with overall tax planning. (MoneyWeek)

National Insurance Contributions (NICs)

• For employees in 2025/26: primary threshold is £242 per week and the upper earnings limit is aligned with the higher rate threshold of £50,270. (House of Commons Library)
• The main rate (for employees) is 8% on earnings between the threshold and upper earnings limit; 2% above the upper limit. (House of Commons Library)

Pension Annual Allowance

• For 2025/26 the standard annual allowance remains at £60,000 (the maximum amount you can contribute to your pension tax-efficiently) unless tapering applies. (shorthousemartin.co.uk)

5. How to calculate your tax for 2025/26

Here’s a step-by-step example of how you might estimate your income tax for the year. Note: This is illustrative; actual tax may differ due to deductions, reliefs, student loan repayments, etc.

Example 1: England/Wales/NI taxpayer

• Annual salary: £60,000
• Assume full personal allowance applies (£12,570).

Calculation:

1. Taxable income = £60,000 – £12,570 = £47,430
2. Basic rate applies up to £50,270 (which includes that personal allowance adjustment)
   • You fall entirely within the basic and higher rate bands:
   • Basic rate (20%) on £37,700 (that is £50,270 minus £12,570) = £7,540
   • Higher rate (40%) on remaining £47,430 – £37,700 = £9,730 → tax = £9,730 × 40% = £3,892
3. Total income tax ~ £7,540 + £3,892 = £11,432
4. Then you’d subtract any tax-free interest/dividends etc and account for NICs.

Example 2: Earning £110,000

• Salary: £110,000
• Personal allowance tapered: you earn £10,000 over £100,000, so your allowance is reduced by £10,000 ÷ 2 = £5,000. So new allowance = £12,570 – £5,000 = £7,570.

Taxable income = £110,000 – £7,570 = £102,430

Bands:

• Now basic rate band: up to £50,270 (so taxable in 20% band = £50,270 – £7,570 = £42,700)
• Then 40% band: from £50,270 to £125,140 covers your remaining £110,000 – £50,270 = £59,730, so taxed at 40% = £23,892
• Additional 45% band does not apply because you’re below £125,140.

Approx tax = £42,700 × 20% + £59,730 × 40% = £8,540 + £23,892 = £32,432

You also get very high marginal rates because you are losing allowance while paying the 40% rate.

6. Important considerations & planning tips

Know your marginal tax rate

Your marginal tax rate is the rate you pay on your next £1 of income. If you’re at a point where your personal allowance is tapered (income between £100k and £125,140) then your next £1 might effectively be taxed at ~60% as you lose £0.50 of allowance while paying 40% tax on it. Planning for this zone is especially important.

Pension contributions and tax relief

Making contributions into a pension can reduce your taxable income (for tax relief purposes) and potentially keep you below a higher bracket. Especially useful if you’re approaching higher rate thresholds or losing personal allowance.

Salary sacrifice arrangements

If you are employed, salary sacrifice schemes (for pension contributions, cycle to work, childcare vouchers) may reduce your taxable income and help you stay in a lower band.

Savings and dividends

Maximise your tax-free allowances for savings interest (£1,000 basic rate, £500 higher rate) & dividends (£500 allowance). Consider using ISAs (which shelter interest and dividends entirely) and manage your investment portfolio tax-efficiently.

Be alert for fiscal drag

Since thresholds are frozen, even a modest pay rise or inflation-adjusted wage may push you into a higher band. Don’t assume you’re safe simply because your gross income hasn’t changed significantly — your tax band might have.

Scottish taxpayers

If you live in Scotland, the tax bands differ. The starter, basic and intermediate bands are lower (or different) than England/Wales/NI. If you live in Scotland or plan to move, consider how that changes your tax position.

Self-employed / proprietor / rental income

Tax thresholds apply to all taxable income (employment, self-employment, rental, dividends, etc). If you have mixed income sources you’ll want to aggregate and ensure you’re applying the correct bands and allowances.

Don’t forget National Insurance & other taxes

Income tax is just one part of the picture. NICs, CGT, Inheritance Tax, Dividend tax, and local taxes all interact. For example, if you’re paying higher rate income tax, the PSA for savings drops and dividend tax rates rise.

7. What’s not changing — and why that’s significant

Some thresholds and bands remain unchanged for 2025/26, and that has implications.

Frozen personal allowance

As mentioned: the personal allowance remains at £12,570. Because inflation and wage growth continue, you effectively pay tax on a larger portion of your income. (House of Commons Library)

Frozen basic and higher rate bands

The basic rate band (£12,571–£50,270) and the higher rate threshold (£50,271) remain unchanged, meaning more people may cross into the 40% band over time. (agmead.co.uk)

Implication for take-home pay

Even if your gross pay stays the same, your net pay may fall in real terms because more of your income is taxed at a higher rate. This has big consequences for budgeting and financial planning.

8. Sector-specific and less-well-known thresholds to watch

Dividend income

The dividend allowance (£500 for 2025/26) and the rates on dividends (8.75%/33.75%/39.35% depending on band) mean that if you have dividend income you’ll want to plan where this fits into your overall tax bands. (wesleyan.co.uk)

Savings income

Interest income is taxed after the personal allowance and PSA are considered — so if you have investment income you’ll want to check whether you get the £1,000 or £500 PSA (depending on your band).

Capital gains tax (CGT)

While thresholds for CGT may differ, the interplay between income tax bands and CGT matters (e.g., if you sell an asset and that pushes you into a higher income tax band your CGT liability may also increase). Changes to CGT rates and allowances mean planning is key. (MoneyWeek)

Pensions

• Annual allowance for pension contributions: £60,000 for 2025/26. (shorthousemartin.co.uk)
• If your income is high (adjusted incomes > £260,000) you may face a tapered/ reduced pension annual allowance.
• For higher earners, pension contributions can reduce taxable income and mitigate the impact of being pushed into a higher band or losing personal allowance.

Rent, Self-Employment, Company profits

If you have rental income, are self-employed, or own a company, the same income tax bands apply to your total non-savings, non-dividend income. Ensure that you consider all sources of income when determining your tax band.

9. What about thresholds in other UK regions and taxes?

Wales

For 2025/26, Welsh taxpayers pay the same income tax bands as England & Northern Ireland (since the Welsh Government has opted not to introduce distinctive rates for now).

Scotland

As seen earlier, Scotland has its own bands and rates. That means if you live there, your threshold and rate structure differ; some bands are lower and some rates higher. (mygov.scot)

Other taxes

• Inheritance Tax, Capital Gains Tax and Stamp Duty Land Tax also have thresholds and bands you should be aware of.
• National Insurance thresholds (both employee and employer) feed into the cost of employment and can affect decisions.
• Companies and business owners should be aware of Corporate Tax thresholds and allowances (though that’s outside the scope of this article).

10. Practical steps you can take now for the 2025/26 year

Here are actionable steps to consider in light of the thresholds and bands for 2025/26:

1. Check your current tax band – Estimate your taxable income and see which band you fall into given the unchanged thresholds.
2. Plan for any changes in income – If you expect a pay rise, bonus, rental income or other income increase, calculate how that affects your tax band or personal allowance.
3. Review pension contributions – Increasing pension contributions can reduce your taxable income, helping you avoid slipping into a higher band or losing your allowance.
4. Make use of tax-efficient wrappers – ISAs for savings & investments, pension reliefs, salary sacrifice schemes, dividend planning.
5. Monitor savings & investment income – Make sure you’re utilising your PSA (£1,000 basic rate / £500 higher rate) and dividend allowance (£500) for 2025/26.
6. Budget for NICs – If you’re employed, account for National Insurance contributions in addition to income tax — they affect take-home pay.
7. Specialist income – If you have rental properties, are self-employed, or receive dividends, ensure you aggregate income correctly and plan for the right tax band.
8. Consider timing – In some cases you may choose to defer income, accelerate pension contributions or defer capital gains into a later tax year, depending on your circumstances.
9. Stay aware of Scotland vs rest of UK differences – If you live in or are moving to Scotland, check how your tax bands will change.
10. Keep an eye on policy changes – Although the thresholds are frozen now, future Budgets might change allowances, rates or thresholds. Be ready for updates.

11. Frequently Asked Questions (FAQs)

Q: Will the tax rates (20%, 40%, 45%) change in 2025/26?
A: No — for 2025/26 the main income tax rates will remain at 20%, 40% and 45% for England, Wales and Northern Ireland. (House of Commons Library)

Q: Why is my allowance being reduced if I earn over £100,000?
A: Because if your adjusted net income is over £100,000, you lose £1 of your personal allowance for every £2 of income above that. Once your income hits £125,140, your allowance is entirely gone. (PwC Tax Summaries)

Q: Does the basic and higher rate threshold include the personal allowance?
A: The higher rate threshold of £50,270 applies to taxable income (after deduction of the personal allowance). If you have full allowance, your taxable income up to £50,270 falls under the basic rate (20%). (agmead.co.uk)

Q: Are the tax thresholds indexed for inflation each year?
A: Not always. For 2025/26 many thresholds and bands are frozen. The government has indicated that thresholds may start to be uprated in future (post-2028) but for now the freeze remains. (Reuters)

Q: What if I’m self-employed or have multiple income sources?
A: All your taxable income from employment, self-employment, rental, dividends, etc, is aggregated (subject to allowances and reliefs). You apply the same bands and allowances. You’ll want to plan carefully.

Q: Do these thresholds apply to capital gains tax?
A: No — CGT has its own allowances and rates. But your income tax band can affect the rate at which you pay CGT (for example higher income may push you into a higher CGT rate).

Q: If my income is just above a threshold, what can I do?
A: Consider pension contributions, salary sacrifice, deferring income, or using tax-efficient investment vehicles. Speak to a financial adviser if necessary.

12. Looking ahead: What might change in future years?

• The freeze on thresholds is set to run until at least April 2028 (for some allowances). That means the risk of fiscal drag remains. (House of Commons Library)
• The government has suggested that after the freeze ends, thresholds will be uprated with inflation. (Reuters)
• Political and economic pressures (e.g., cost of living, public finances) may lead to changes in rates, allowances or bands in future budgets. Keep informed.
• If you have significant changes in your personal circumstances, such as moving to Scotland, increasing rental or dividend income or changing employment status, you will need to reassess your threshold position.
• Tax planning will become more important as more people get pulled into higher tax brackets without “doing more” in terms of workload or salary growth.

13. Final Thoughts

Understanding the tax thresholds for 2025/26 is crucial for effective financial planning. Whether you’re an employee, self-employed, investor, pensioner or business owner, knowing where your income sits in the tax bands helps you optimise your take-home pay and make intelligent decisions.

Key takeaways:

• The personal allowance (£12,570) remains unchanged.
• Income tax bands (20%, 40%, 45%) remain the same as the previous year in England/Wales/NI.
• Thresholds are frozen, which increases the importance of planning due to fiscal drag.
• Scottish taxpayers face a different band structure and rates.
• Pension contributions, pension planning, savings, dividends and timing income are all tools you can use to mitigate higher tax or stay in a lower band.

If you’re unsure about your personal situation, it may be worthwhile to consult a tax adviser or financial planner — especially if your income is near a threshold, you expect changes in income, or you have multiple income streams.
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