UK Tax Changes 2025-2026: Complete Guide to New Rates, Thresholds & Rules

Last Updated: February 2026 | Tax Year: 2025-2026

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.

Quick Summary

• Headline changes for 2025-26 across Income Tax, NI, and student loans.
• Which thresholds remain frozen and what that means for take-home pay.
• Where Scottish rates differ from the rest of the UK.

What's Changed: The Headlines

Income Tax: Personal allowance and bands still frozen at £12,570 / £50,270 (until April 2031) National Insurance: Employee main rate stays 8%; employer rate is 15% above the £5,000 secondary threshold (annual) Pension: Annual allowance remains £60,000; LTA charge removed and replaced by lump sum allowances Student Loans: Thresholds updated (Plan 1 £26,065; Plan 2 £28,470; Plan 4 £32,745; Plan 5 £25,000; Postgraduate £21,000) Scottish Tax: 2025-26 bands updated (higher rate starts at £43,663)

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 2031. That's a multi-year freeze.

Why does this matter? Inflation. As wages rise, 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 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 and is fully removed at £125,140

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 £60,000
• Full charge applied when income reaches £80,000
• Rate: 1% of child benefit for every £200 of income over £60,000

Earn £70,000 with two kids? That's a 50% charge (1% per £200 over £60,000).

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: 8% on earnings between thresholds, 2% above

What's New:

Thresholds remain aligned with the personal allowance. The main employee rate stays at 8%, and employer Class 1/1A/1B rates are 15% above the £5,000 secondary threshold (annual).

At least something's consistent.

Self-Employed National Insurance

Class 2 National Insurance:

• Small Profits Threshold: £6,845
• Weekly rate: £3.50 (if profits exceed threshold)

Class 4 National Insurance:

• Lower Profits Limit: £12,570
• Upper Profits Limit: £50,270
• Rate: 6% on profits between limits, 2% above

Pension Contribution Changes 2025-2026

Annual Allowance (Unchanged at £60,000)

The pension annual allowance remains £60,000 for 2025-26.

Who Benefits:

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

It still provides significant scope for tax-efficient saving if you're a higher-rate taxpayer.

Tapered Annual Allowance

The tapered annual allowance still applies to high earners:

• Tapering applies when threshold income exceeds £200,000 and adjusted income exceeds £260,000
• Minimum allowance remains at £10,000
• Tapering rate: £1 reduction for every £2 of adjusted income over £260,000

Lifetime Allowance Charge Removed (Lump Sum Caps Remain)

The lifetime allowance charge is removed, but tax-free lump sums are capped by the Lump Sum Allowance (LSA) of £268,275 and the Lump Sum and Death Benefit Allowance (LSDBA) of £1,073,100.

You can still build pension savings above these amounts, but any lump sums above the allowances are taxable.

Student Loan Changes 2025-2026

Plan 2 Loans (Most Common)

Repayment Threshold: £28,470 Rate: 9% of income above threshold Interest Rate: 3.2% to 6.2% depending on income (2025-26 rates)

Other Student Loan Plans

2025-26 Interest Rates: Plan 1, Plan 4, and Plan 5 are 3.2%; Postgraduate loans are 6.2%.

Plan 1 (Pre-2012 students):

• Threshold: £26,065
• Rate: 9% above threshold

Plan 4 (Scotland):

• Threshold: £32,745
• Rate: 9% above threshold

Plan 5 (2023+ students):

• Threshold: £25,000
• Rate: 9% above threshold

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-£15,397 Basic Rate: 20% on £15,398-£27,491 Intermediate Rate: 21% on £27,492-£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 is £3,000 for 2025-26.

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 maths. That £3,000 reduction means more tax.

ISA and Savings Changes 2025-2026

ISA Allowances

Overall ISA Limit: £20,000 Stocks & Shares / Cash / Innovative Finance ISA: Share the same £20,000 overall limit 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

Dividend Allowance

Dividend Allowance: £500 tax-free dividends in 2025-26

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 Residence Nil Rate Band: £175,000 (when passing a home to direct descendants) Residence nil-rate band taper starts: £2 million estate value Combined Allowance: Up to £1 million for married couples/civil partners if both bands are available

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 the £60,000 annual allowance Strategy: Consider Marriage Allowance and ISA contributions

Higher Earners (£50,000+)

Significant: £60,000 pension annual allowance remains available for planning Alert: High Income Child Benefit Charge applies from £60,000 Plan: Use pension contributions to reduce taxable income

Very High Earners (£100,000+)

Complex: Personal allowance tapering creates an effective 60% marginal income tax band between £100k-£125,140 Opportunity: Pension contributions can reduce adjusted income back under £100k Strategy: Scottish vs UK tax planning if location flexible

Use pension contributions (or other reliefs) to bring adjusted net income below £100k and preserve the personal allowance.

Planning Actions for 2025-2026

Before April 5, 2026

1. Use any remaining ISA allowance before year-end
2. Review pension contributions to use the £60,000 annual allowance
3. Use your £3,000 CGT annual exempt amount if you plan disposals

Early 2025-2026 Tax Year

1. Check payroll uses the 2025-26 NI rates and thresholds (8% employee, 15% employer)
2. Review student loan deductions with the updated thresholds
3. Plan pension contributions using the £60,000 annual allowance

Throughout 2025-2026

1. Monitor Scottish tax if considering relocation
2. Track marriage allowance claims and renewals
3. Plan CGT disposals carefully with the £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 current pension allowances
• Scottish tax rate comparisons
• Student loan repayment updates for all plans
• Marriage allowance optimization suggestions
• Pension contribution modeling with the £60,000 annual allowance

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

Key Takeaways

1. Threshold freezes continue to increase the tax burden through fiscal drag
2. Pension rules keep the £60,000 annual allowance and remove the LTA charge, but lump sum allowances cap tax-free cash
3. Scottish taxpayers face increasingly different tax obligations
4. Student loan modifications vary significantly by plan type
5. 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. The annual allowance remains £60,000 and the LTA charge is removed (with lump sum caps), which still provides planning opportunities for higher earners.

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.

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Frequently Asked Questions

Q: Do these changes apply to Scotland?
A: Most UK-wide taxes do, but Scottish income tax bands differ. Your residency determines which bands apply.

Q: Are thresholds still frozen?
A: Yes, many key thresholds remain frozen, which increases effective tax as wages rise.

Q: Where can I see the impact on my salary?
A: Use the calculator to model your pay with the latest thresholds.