The 2025-26 tax year brings changes that'll affect millions of UK taxpayers. Some good, some not. Here's what actually matters—no political spin, no waffle.

What's Changed: The Headlines

Income Tax: Personal allowance still frozen at £12,570 (fifth year running) National Insurance: New thresholds, same rates Pension: Annual allowance increased to £60,000 (this is huge) Student Loans: Updated repayment thresholds for all plans Scottish Tax: Additional rate bands continue the divergence

If you're earning the same as last year, you're effectively paying more tax thanks to inflation and frozen thresholds. Welcome to fiscal drag.

Income Tax Changes 2025-2026

Personal Allowance Freeze Continues

The personal allowance remains frozen at £12,570 until April 2028. That's five years without an increase.

Why does this matter? Inflation. Average wages are rising 4-6% per year. More people are crossing into higher tax brackets without actually earning "more" in real terms.

Impact: If you earn exactly £12,570, you still pay no income tax. But if you got a 5% pay rise to keep up with inflation? You're paying tax on that "raise"—even though your purchasing power hasn't increased.

This is how the government increases tax revenue without technically raising tax rates. Clever. Annoying.

Income Tax Bands and Rates

England, Wales & Northern Ireland:

Personal Allowance: £0-£12,570 (0%) Basic Rate: £12,571-£50,270 (20%) Higher Rate: £50,271-£125,140 (40%) Additional Rate: Over £125,140 (45%)

Key Changes:

Higher rate threshold remains frozen at £50,270
Additional rate threshold stays at £125,140
Personal allowance tapering begins at £100,000 (unchanged)

No rate changes. Just more people dragged into higher brackets.

High Income Child Benefit Charge

Still kicking in at the same thresholds:

Charge begins when income exceeds £50,000
Full charge applied when income reaches £60,000
Rate: 1% of child benefit for every £100 of income over £50,000

Earn £55,000 with two kids? You're repaying £1,056 in child benefit through your tax return. Fun times.

National Insurance Changes 2025-2026

Employee National Insurance

Class 1 National Insurance Rates:

Primary Threshold: £12,570 annually (£242 weekly) Upper Earnings Limit: £50,270 annually (£967 weekly) Rate: 12% on earnings between thresholds, 2% above

What's New:

Thresholds aligned with income tax personal allowance. No rate changes from 2024-25. Class 1A and 1B rates remain at 13.8% for employers.

At least something's consistent.

Self-Employed National Insurance

Class 2 National Insurance:

Small Profits Threshold: £12,570
Weekly rate: £3.45 (if profits exceed threshold)

Class 4 National Insurance:

Lower Profits Limit: £12,570
Upper Profits Limit: £50,270
Rate: 9% on profits between limits, 2% above

Self-employed? You're still paying less NI than employees. That's not changing.

Pension Contribution Changes 2025-2026

Annual Allowance Increase

Here's the big one. The pension annual allowance increases to £60,000 for 2025-26, up from £40,000.

Who Benefits:

High earners with significant pension capacity
Those catching up on missed contributions
Business owners planning retirement strategies

This is a massive opportunity if you're a higher-rate taxpayer. Every pound into your pension gets 40% relief, and you can now put in £60k per year.

Tapered Annual Allowance

The tapered annual allowance still applies to high earners:

Reduction begins when threshold income exceeds £200,000
Minimum allowance remains at £10,000
Tapering rate: £1 reduction for every £2 of adjusted income over threshold

Earn £300k? Your annual allowance is £10k, not £60k. HMRC giveth, HMRC taketh away.

Lifetime Allowance Abolition

Permanently removed for 2025-26 and beyond.

Impact:

No limit on total pension savings growth
Simplified pension planning for high-net-worth individuals
Enhanced retirement security for long-term savers

Used to be you'd pay tax on pension pots over £1.073m. Now? Stack it as high as you want (within annual allowances).

Student Loan Changes 2025-2026

Plan 2 Loans (Most Common)

Repayment Threshold: £27,295 (unchanged) Rate: 9% of income above threshold Interest Rate: RPI + 0-3% (capped at 7.3% during high inflation)

Other Student Loan Plans

Plan 1 (Pre-2012 students):

Threshold: £22,015
Rate: 9% above threshold

Plan 4 (Scotland):

Threshold: £27,660
Rate: 9% above threshold

Plan 5 (2023+ students):

Threshold: £25,000
Rate: 9% above threshold
New: 30-year write-off period (reduced from 40 years)

That Plan 5 change is huge. Ten years less of repayments.

Postgraduate Loans:

Threshold: £21,000
Rate: 6% above threshold

Scottish Tax Rates 2025-2026

Income Tax Rates

Scotland continues its own approach:

Starter Rate: 19% on £12,571-£14,876 Basic Rate: 20% on £14,877-£26,561 Intermediate Rate: 21% on £26,562-£43,662 Higher Rate: 42% on £43,663-£75,000 Advanced Rate: 45% on £75,001-£125,140 Top Rate: 48% on income over £125,140

Scottish taxpayers pay significantly more tax on higher incomes compared to the rest of the UK. We covered this in detail in our Scottish vs English tax comparison.

Marriage Allowance 2025-2026

Eligibility and Amount

Transfer Amount: £1,260 (10% of personal allowance) Maximum Saving: £252 per year Eligibility: Non-taxpayer can transfer to basic-rate taxpaying spouse/civil partner

Still available. Still underused. If you're eligible, claim it. It's free money.

Application Process

Apply online through HMRC
Can backdate up to 4 tax years
Automatic renewal unless circumstances change

Takes five minutes. Could save you £1,000+ if you backdate.

Capital Gains Tax 2025-2026

Annual Exempt Amount

Significant Reduction: The CGT annual exempt amount reduces to £3,000 for 2025-26, down from £6,000 in 2024-25.

This hurts if you're selling assets. You can now only make £3,000 in gains before paying tax.

Tax Rates

Basic Rate Taxpayers: 10% (18% for residential property) Higher/Additional Rate: 20% (24% for residential property)

If you're planning to sell investments, do the math. That £3,000 reduction means more tax.

ISA and Savings Changes 2025-2026

ISA Allowances

Overall ISA Limit: £20,000 Stocks & Shares ISA: £20,000 Cash ISA: £20,000 Innovative Finance ISA: £20,000 Lifetime ISA: £4,000 (within overall limit)

Unchanged. Use them.

Personal Savings Allowance

Basic Rate Taxpayers: £1,000 tax-free savings interest Higher Rate Taxpayers: £500 tax-free savings interest Additional Rate Taxpayers: £0 tax-free allowance

With interest rates still relatively high, this matters more than it did a few years ago.

Inheritance Tax 2025-2026

Rates and Thresholds

Nil Rate Band: £325,000 (frozen until 2028) Residence Nil Rate Band: £175,000 (when passing home to children) Combined Allowance: Up to £1 million for married couples Tax Rate: 40% above thresholds

Frozen thresholds mean more estates are caught by IHT. House prices rise, thresholds don't. More people pay.

What These Changes Mean for You

Low Earners (£20,000-£30,000)

Challenge: Frozen allowances mean you're paying tax on inflation-related pay rises Opportunity: Marriage allowance could save £252 per year Action: Review student loan repayments if applicable

Middle Earners (£30,000-£50,000)

Challenge: Threshold freezes mean effective tax increases Opportunity: Maximize pension contributions with higher £60,000 annual allowance Strategy: Consider Marriage Allowance and ISA contributions

Higher Earners (£50,000+)

Significant: New £60,000 pension annual allowance provides major planning opportunities Alert: High Income Child Benefit Charge still applies from £50,000 Plan: Use pension contributions to reduce taxable income

Very High Earners (£100,000+)

Complex: Personal allowance tapering creates effective 60% tax rate between £100k-£125k Opportunity: Pension contributions can reduce adjusted income back under £100k Strategy: Scottish vs UK tax planning if location flexible

Earn £110k? You're paying 60% tax on that middle £10k. Put £10k into your pension, drop back to £100k taxable, save £6,000 in tax.

Planning Actions for 2025-2026

Before April 5, 2025

Maximize ISA contributions while limits remain unchanged
Review pension contributions ahead of annual allowance increase
Consider capital gains crystallization before lower exemption takes effect

Early 2025-2026 Tax Year

Update payroll for any employer pension scheme changes
Review student loan repayment calculations with new thresholds
Plan higher pension contributions using increased £60,000 allowance

Throughout 2025-2026

Monitor Scottish tax if considering relocation
Track marriage allowance claims and renewals
Plan CGT disposals carefully with reduced £3,000 exemption

How Our Tax Calculator Helps

Our UK Tax Calculator is updated with all 2025-26 rates and thresholds, including:

Real-time calculations with new pension allowances
Scottish tax rate comparisons
Student loan repayment updates for all plans
Marriage allowance optimization suggestions
Pension contribution modeling with increased limits

Plug in your numbers. See what you'll actually pay.

Key Takeaways

Threshold freezes continue to increase the tax burden through fiscal drag
Pension changes offer significant opportunities for retirement planning
Scottish taxpayers face increasingly different tax obligations
Student loan modifications vary significantly by plan type
Planning opportunities exist despite overall tax increases

The 2025-26 tax year brings both challenges and opportunities. Frozen thresholds increase effective tax rates for many. But the substantial increase in pension allowances and the removal of lifetime limits provide significant planning opportunities if you can take advantage of them.

Need to calculate your exact tax position for 2025-26? Use our comprehensive tax calculator to see how these changes affect your specific situation, complete with Scottish tax calculations, student loan repayments, and optimized pension contribution recommendations.

Disclaimer: Tax rules change frequently. This guide covers 2025-26 rates and thresholds. Individual circumstances vary. For complex situations or personalized advice, consult a qualified tax professional.