Tax UK Personal Finance
8 minute read · Updated April 2026
Every April, a fresh set of financial rules kicks in — some quietly helpful, some quietly painful, most barely noticed until they show up in your payslip or pension statement. The 2026/27 tax year starts on 6 April 2026. Here is a plain-English rundown of everything that actually changes, what stays the same, and what it means in practice for your money.
The personal allowance — the amount you can earn before paying any income tax — remains stuck at £12,570 for 2026/27. It has sat at this level since 2021/22 and the freeze is locked in until at least April 2031.
The higher-rate threshold also stays at £50,270. You start paying 40% tax on every pound above that. The additional rate threshold remains at £125,140, above which the personal allowance is withdrawn entirely.
| Tax Band | 2026/27 Income Range | Rate |
|---|---|---|
| Personal allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 – £50,270 | 20% |
| Higher rate | £50,271 – £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
Employee National Insurance rates are unchanged for 2026/27. You pay 8% on earnings between the Primary Threshold (£12,570) and the Upper Earnings Limit (£50,270), and 2% on everything above that.
However, employer NI remains at the elevated level introduced in April 2025 — 15% on earnings above the secondary threshold of £5,000. This continues to affect take-home pay indirectly, as many employers absorb this cost by limiting pay rises or bonuses.
The biggest positive change for retirees. The full new State Pension rises by 4.8% from 6 April 2026 under the triple lock guarantee — the highest of earnings growth, CPI inflation, or 2.5%. Earnings growth of 4.8% won this year.
| State Pension Type | 2025/26 (weekly) | 2026/27 (weekly) | Annual 2026/27 |
|---|---|---|---|
| New State Pension (post-April 2016) | £230.25 | £241.30 | ~£12,547 |
| Basic State Pension (pre-April 2016) | £176.45 | £184.90 | ~£9,614 |
The pension annual allowance stays at £60,000 for 2026/27. This is the maximum you (and your employer) can contribute to your pension in a single tax year and still receive tax relief.
Most people contribute far less than this — the average UK pension contribution is around £4,000-£6,000 per year — so the limit is not a practical constraint for the majority. But it matters for higher earners, particularly those receiving large bonuses or looking to make catch-up contributions.
The money purchase annual allowance (MPAA) — which applies once you have started flexibly accessing your pension — remains at £10,000. If you have dipped into your pension pot under flexible drawdown and are still working, you can only contribute £10,000 per year rather than £60,000.
The carry forward rule is unchanged: you can carry forward unused annual allowance from the previous three tax years, potentially allowing contributions of up to £180,000 in a single year if you have the means. A new tax year beginning on 6 April means the 2022/23 allowance drops off — if you had unused allowance from that year, this is the last tax year you can use it.
The ISA allowance remains at £20,000 for 2026/27. Your previous year's unused allowance does not carry over — the clock resets on 6 April with a fresh £20,000.
The Lifetime ISA annual contribution limit stays at £4,000, within which the government adds a 25% bonus (up to £1,000 per year). The LISA sub-limit counts toward the overall £20,000 ISA allowance.
The Junior ISA allowance remains at £9,000 per year.
| ISA Type | 2026/27 Annual Limit |
|---|---|
| Stocks & Shares ISA / Cash ISA / Innovative Finance ISA | £20,000 combined |
| Lifetime ISA (within the £20,000 limit) | £4,000 |
| Junior ISA | £9,000 |
This is one of the changes that will cost some people money in 2026/27. Dividend tax rates are increasing for ordinary and upper rate taxpayers from 6 April 2026.
| Taxpayer | 2025/26 Dividend Rate | 2026/27 Dividend Rate |
|---|---|---|
| Basic rate | 8.75% | 8.75% (unchanged) |
| Higher rate | 33.75% | 35.75% |
| Additional rate | 39.35% | 39.35% (unchanged) |
The dividend allowance — the amount of dividend income you can receive tax-free — remains at £500, down from £2,000 as recently as 2022/23. If you hold shares or funds outside an ISA and receive dividends, you are already paying tax on most of it.
The practical takeaway: if you hold dividend-paying investments outside an ISA, the higher rate increase to 35.75% makes moving them into a Stocks & Shares ISA more worthwhile than ever. Inside an ISA, dividends are completely tax-free.
The main CGT rates are unchanged at 18% (basic rate) and 24% (higher/additional rate) for most assets. The annual CGT exempt amount stays at £3,000.
The one change: Business Asset Disposal Relief (formerly Entrepreneurs' Relief) rises from 14% to 18% from 6 April 2026 for qualifying business disposals. If you are planning to sell a business, this affects your calculation.
From 1 April 2026, the National Living Wage for workers aged 21 and over rises to £12.21 per hour, up from £11.44. A full-time worker on the National Living Wage now earns approximately £24,785 per year before tax.
The National Minimum Wage for 18–20 year olds also rises. These increases feed through to take-home pay immediately for affected workers.
From April 2026, Making Tax Digital for Income Tax (MTD for IT) becomes mandatory for sole traders and landlords with qualifying income above £50,000. Instead of a single annual Self Assessment return, affected individuals must submit quarterly updates to HMRC using compatible software.
The key points: the January 31st final declaration deadline remains. HMRC has confirmed no late submission penalties will apply during the first year (2026/27) as a grace period. The £30,000 threshold group will be brought in from April 2027.
If you are self-employed or a landlord earning above £50,000, check whether your accounting software is MTD-compatible now rather than scrambling after April 6th.
From April 2026, the State Pension age begins its gradual transition from 66 to 67. The increase is phased in gradually and affects those born on or after 6 April 1960. If you were born close to this date, check your personal State Pension forecast at gov.uk to confirm your exact retirement age.
Six practical things worth doing when the new tax year opens on 6 April:
Income tax thresholds frozen until 2031 — if your pay rises, more of it gets taxed. State Pension up 4.8% and closing in on the tax-free threshold. ISA and pension allowances unchanged — use them. Dividend tax rising for higher rate taxpayers — move investments into an ISA if you can. Making Tax Digital landing for higher-earning self-employed and landlords from April. The new tax year is mostly a year of frozen thresholds and quiet erosion rather than dramatic change — but the actions you take in April set the tone for the whole year.
The free calculator works out your projected pot at retirement based on your current contributions, employer match, salary and tax band — updated for 2026/27 allowances.
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