Last updated: 3 July 2026
For the 2026/27 tax year (6 April 2026 to 5 April 2027), the UK personal allowance is £12,570, and income above it is taxed at 20 percent up to £50,270, 40 percent up to £125,140, and 45 percent above that, in England, Wales and Northern Ireland. Scotland runs its own six-band system. The rates themselves are unchanged, but two things did change for 2026/27, and they matter: dividend tax rose by 2 percentage points, and the freeze on tax thresholds was extended all the way to 2031.
Those two changes are the story of 2026/27. Because the bands are frozen while wages rise, more of your income is quietly dragged into tax and into higher bands each year, an effect known as fiscal drag. And if you take dividends, from your own company or from investments, you now pay more on them. This guide gives you every 2026/27 rate, band and allowance, verified against GOV.UK, then explains the traps (the 60 percent band, fiscal drag, the dividend rise) and the legitimate ways to plan around them.
Key takeaways (TL;DR)
- Personal allowance: £12,570, frozen until 2031. You pay no income tax on income up to this figure, but it is withdrawn above £100,000.
- Main rates (England, Wales, NI): 20 percent (basic), 40 percent (higher), 45 percent (additional), across the same bands as last year.
- Dividend tax rose in April 2026: to 10.75 percent (basic) and 35.75 percent (higher), with the additional rate held at 39.35 percent. That is £20 more tax per £1,000 of dividends for most taxpayers.
- Scotland has six bands from 19 percent to 48 percent, applied to earned and pension income.
- The freeze is a stealth tax. With thresholds fixed to 2031 and wages rising, fiscal drag pulls more people into higher bands every year.
What are the UK income tax rates for 2026/27?
For 2026/27, income tax in England, Wales and Northern Ireland is charged at three rates on income above your personal allowance: 20 percent, 40 percent and 45 percent. These rates and the bands they apply to are unchanged from 2025/26, because the thresholds are frozen.
| Band | Taxable income (2026/27) | Rate |
|---|---|---|
| Personal allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
A few points that trip people up. The bands apply to your taxable income, which is your total income (salary, self-employment profit, pension, rental income and more) after your personal allowance is deducted. Income tax is progressive, so you only pay the higher rate on the slice of income that falls into that band, not on your whole income. And these are the rates for England, Wales and Northern Ireland; if you live in Scotland, your rates and bands are different, and are set out below. If you want to see exactly how a salary and dividend mix is taxed, our free UK Corporation Tax calculator and guide is a useful companion for company directors weighing how to draw income.
What is the personal allowance for 2026/27?
The personal allowance for 2026/27 is £12,570, the amount of income you can earn before paying any income tax, and it remains frozen at this level until 2031. It has been stuck at £12,570 since 2021/22, and the Autumn Budget 2025 extended the freeze by a further three years, to 2030/31.
The allowance is not available to everyone in full. Once your adjusted net income exceeds £100,000, your personal allowance is reduced by £1 for every £2 above that figure, and it disappears entirely at £125,140. Blind Person’s Allowance (£3,130 for 2025/26, uprated each year) can be added on top for those who qualify, and any unused portion can be transferred to a spouse. For most people, though, the £12,570 figure is the one that matters, and its long freeze is doing quiet but significant work on tax bills, as explained in the fiscal drag section below.
The 60 percent tax trap: £100,000 to £125,140
Between £100,000 and £125,140 of income, the withdrawal of the personal allowance creates an effective tax rate of 60 percent, one of the highest marginal rates in the UK system. Here is why. For every £2 you earn over £100,000, you lose £1 of tax-free allowance, and that lost allowance is now taxed. So on income in this band you pay 40 percent on the income itself, plus another effective 20 percent as your allowance is clawed back, giving 60 percent.
A worked example makes it concrete. If your income is £110,000, you are £10,000 over the threshold, so you lose £5,000 of personal allowance. That £5,000 becomes taxable at 40 percent, on top of the 40 percent you already pay on the £10,000 itself. The practical lesson is that income in this band is unusually expensive, which is exactly why pension contributions and other reliefs that reduce adjusted net income back below £100,000 are so valuable here. This is one of the clearest cases where a short personal tax planning conversation can save far more than it costs.
What has changed for income tax in 2026/27?
The headline change for 2026/27 is that dividend tax rates rose by 2 percentage points, and the freeze on income tax thresholds was extended to 2031. The core income tax rates (20, 40 and 45 percent) and the personal allowance (£12,570) did not change, but three things did.
First, dividend tax went up from 6 April 2026 (covered in detail below). Second, the threshold freeze, previously due to end in 2028, was extended to 2030/31 at the Autumn Budget 2025, deepening fiscal drag. Third, further rises are already scheduled for the year after: from 6 April 2027, tax on savings interest and on property (rental) income will each rise by 2 percentage points across all bands, to 22, 42 and 47 percent, according to HM Treasury measures set out at the Autumn Budget 2025. If you receive dividends, savings interest or rent, your tax is rising, even though the salary rates look unchanged. Landlords and savers in particular should plan ahead for the 2027 rises now.
What are the dividend tax rates for 2026/27?
For 2026/27, dividends above the £500 dividend allowance are taxed at 10.75 percent in the basic-rate band, 35.75 percent in the higher-rate band, and 39.35 percent in the additional-rate band. The basic and higher rates each rose by 2 percentage points from 6 April 2026; the additional rate and the £500 allowance were left unchanged.
| Band your dividends fall into | Dividend rate 2026/27 | Was 2025/26 |
|---|---|---|
| Basic rate | 10.75% | 8.75% |
| Higher rate | 35.75% | 33.75% |
| Additional rate | 39.35% | 39.35% |
In cash terms, the rise costs about £20 more in tax for every £1,000 of dividends taxed at the basic or higher rate. That hits two groups hardest: investors holding shares outside an ISA, and company directors who pay themselves largely in dividends. One mechanic worth understanding is that dividends are treated as the top slice of your income: they stack on top of your salary and other income, so a modest salary can still push much of your dividend income into the higher-rate band.
Take a common example for 2026/27. A director takes a £12,570 salary (covered by the personal allowance) and £50,000 in dividends. The first £500 of dividends is covered by the allowance. Around £37,700 then falls in the basic-rate band and is taxed at 10.75 percent (roughly £4,050), and the remaining £11,800 or so crosses into the higher-rate band at 35.75 percent (roughly £4,220), for a dividend tax bill of about £8,270. With rates rising, the salary-versus-dividend decision, and the interaction with Corporation Tax, is worth reviewing rather than assuming last year’s approach still wins.
What are the Scottish income tax rates for 2026/27?
If you live in Scotland, your earned and pension income is taxed under a six-band system in 2026/27, ranging from a 19 percent starter rate to a 48 percent top rate. The personal allowance is the same £12,570 as the rest of the UK, but the bands and rates above it differ.
| Band | Taxable income (2026/27) | Rate |
|---|---|---|
| Starter rate | £12,571 to £15,397 | 19.00% |
| Basic rate | £15,398 to £27,491 | 20.00% |
| Intermediate rate | £27,492 to £43,662 | 21.00% |
| Higher rate | £43,663 to £75,000 | 42% |
| Advanced rate | £75,001 to £125,140 | 45% |
| Top rate | Over £125,140 | 48% |
Two things to note. Scottish income tax applies to earned income, pensions and rental income, but not to dividend or savings income, which are taxed at the UK-wide rates shown above regardless of where you live. And the higher rates start to bite sooner in Scotland: the 42 percent band begins at £43,663, well below the £50,270 point where the rest of the UK moves to 40 percent, so a Scottish higher earner generally pays more.
What are the savings and other allowances for 2026/27?
Beyond the personal allowance, several other allowances reduce what you pay in 2026/27, and using them fully is the foundation of personal tax planning. The main ones are below.
- Dividend allowance: £500. The first £500 of dividend income each year is tax-free (it still uses part of your band).
- Personal savings allowance: £1,000 of savings interest tax-free for basic-rate taxpayers, £500 for higher-rate, and nil for additional-rate.
- Starting rate for savings: up to £5,000. If your non-savings income is low, you can earn up to £5,000 of savings interest at 0 percent; this reduces by £1 for every £1 of non-savings income above the personal allowance.
- Marriage Allowance: £1,260. A spouse or civil partner who does not use their full personal allowance can transfer £1,260 of it to a basic-rate-paying partner, saving up to £252 a year, and claims can be backdated four years.
- Trading and property allowances: £1,000 each. The first £1,000 of trading income and the first £1,000 of property income are tax-free.
- ISA allowance: £20,000. Income and gains inside an ISA are tax-free, and you can now spread the allowance across more than one ISA of the same type.
Making full use of these is not aggressive tax avoidance; it is simply using the reliefs Parliament created. The tax advisory support we provide often starts by checking that individuals and directors are not leaving these everyday allowances unclaimed.
Fiscal drag: why frozen thresholds cost you more
Fiscal drag is the stealth tax created by freezing tax thresholds while incomes rise: as your pay increases, more of it crosses fixed thresholds into tax, or into higher bands, even though the rates never officially went up. With the personal allowance and higher-rate threshold frozen until 2031, fiscal drag is the single biggest driver of rising personal tax bills this decade.
The mechanism is simple but powerful. If the higher-rate threshold had risen with inflation since 2021, it would be well above £50,270 by now. Because it is frozen, every pay rise you get pushes more of your income towards, and eventually into, the 40 percent band. The Office for Budget Responsibility and independent analysts have repeatedly shown that the threshold freeze raises more revenue than several headline tax rises combined, precisely because it is invisible on a payslip. The same freeze interacts with rising wages, including the April 2026 minimum wage increases, to pull ever more people into tax. For you, the practical response is to focus on the levers you control: pension contributions, ISAs, the marriage allowance, and, for business owners, how you structure income. None of that changes the freeze, but all of it reduces how much of your income the freeze can reach.
How is income tax actually calculated? A worked example
Income tax is calculated by stacking your income through the bands in order, applying each rate only to the slice of income that falls in that band. Here is a full worked example for someone in England earning £60,000 in 2026/27.
The first £12,570 is covered by the personal allowance and taxed at 0 percent. The next slice, from £12,571 to £50,270 (that is £37,700), is taxed at the basic rate of 20 percent, which is £7,540. The remaining income, from £50,271 to £60,000 (that is £9,730), falls into the higher-rate band and is taxed at 40 percent, which is £3,892. Add the two together and the income tax bill is £11,432, an effective rate of about 19 percent across the whole £60,000, even though the top slice is taxed at 40 percent. National Insurance is charged separately on top. Understanding this stacking is what lets you see why a pension contribution, which effectively comes off your top slice, saves tax at your highest rate rather than your average one.
Personal tax planning for 2026/27: legitimate ways to reduce your bill
The most effective way to reduce your 2026/27 income tax bill is to use the allowances and reliefs the system provides, before the tax year ends, rather than after. None of the following is aggressive; all of it is standard, legitimate planning.
- Maximise pension contributions. They receive tax relief at your highest rate, reduce your adjusted net income (useful around the £100,000 trap and the child benefit charge), and are one of the few genuine ways to escape the 60 percent band.
- Use your ISA allowance. Sheltering savings and investments in a £20,000 ISA removes future income tax on interest and dividends, which matters more now that dividend and savings rates are rising.
- Claim the marriage allowance if one partner is a non-taxpayer and the other is a basic-rate payer, for a saving of up to £252 a year, backdatable four years.
- Review your salary and dividend mix if you run a company, because the April 2026 dividend rise changes the maths of profit extraction and its interaction with Corporation Tax.
- Time income and gains across tax years where you can, to avoid bunching income into a single year and tipping into a higher band or the 60 percent trap.
- Check your tax code. A wrong code is one of the most common reasons people overpay or underpay, and it is quick to fix.
Good planning is about sequencing these correctly for your situation, which is where our tax advisory and Self Assessment support earns its keep. The wider accounting and finance support we provide keeps the records behind all of it clean and current.
Do you need to file a Self Assessment for 2026/27?
You must file a Self Assessment tax return if HMRC cannot collect all the tax you owe through your tax code, which typically applies to the self-employed, company directors with untaxed income, landlords, higher earners, and anyone with significant dividends or savings income above the allowances. If you are unsure, it is safer to check than to assume PAYE has covered everything.
The key dates run on a fixed cycle. You must register for Self Assessment by 5 October following the end of the tax year, file online and pay any tax due by 31 January, and, if your bill is large enough, make payments on account by 31 January and 31 July. For dividends specifically, you need to report them once they exceed your £500 allowance and any unused personal allowance, and the responsibility to tell HMRC sits with you, because it has no automatic feed of dividends from private companies. If a return or a payment goes wrong, our guide to contacting HMRC walks through the routes, and our tax compliance service handles the whole filing cycle so nothing is missed.
Case study: personal tax and Self Assessment done right
Getting personal tax right is less about knowing the rates and more about applying them accurately, on time, every year. On Clutch, the independent B2B review platform that verifies client feedback, Acenteus CCA holds 100 percent positive reviews for exactly this kind of dependable compliance work.
A Cambridge accounting firm that outsources its Self Assessment work, alongside bookkeeping, VAT and accounts, to Acenteus reported that the team “completed all tasks on time with minimal errors,” providing “clear and well-structured work description reports, supporting transparency and review.” A separate client described the wider effect: “Acenteus’ accounting outsourcing has transformed how we manage compliance and reporting. Their precision and efficiency free up our time to focus on high-value advisory work.”
The relevance to your own tax is direct. With the personal allowance frozen, dividend rates rising, and the 60 percent band and child benefit charge waiting to catch the unwary, the cost of an error or a missed allowance has gone up. Accurate records and a considered return, filed on time, are what turn a rising-tax environment from a threat into something managed, and that is precisely what a good tax service delivers as routine.
Frequently Asked Questions (FAQ)
For 2026/27 in England, Wales and Northern Ireland, income above the £12,570 personal allowance is taxed at 20 percent up to £50,270, 40 percent from £50,271 to £125,140, and 45 percent above £125,140. These rates are unchanged from 2025/26 because the thresholds are frozen. Scotland has its own six-band system from 19 percent to 48 percent.
The personal allowance for 2026/27 is £12,570, the amount you can earn before paying income tax. It has been frozen since 2021/22 and, following the Autumn Budget 2025, will stay frozen until 2031. Your allowance is reduced by £1 for every £2 of income over £100,000 and disappears entirely once your income reaches £125,140.
The main income tax rates (20, 40 and 45 percent) did not change for 2026/27, but dividend tax rose by 2 percentage points to 10.75 and 35.75 percent, and the freeze on thresholds was extended to 2031. From April 2027, savings and property income tax rates will also rise by 2 percentage points. So although the headline rates look static, tax on non-employment income is increasing.
For 2026/27, dividends above the £500 allowance are taxed at 10.75 percent (basic rate), 35.75 percent (higher rate) and 39.35 percent (additional rate). The basic and higher rates each rose by 2 percentage points from 6 April 2026, while the additional rate and the £500 dividend allowance stayed the same. This costs about £20 more per £1,000 of dividends for most taxpayers.
Scotland uses six bands for 2026/27: a 19 percent starter rate (£12,571 to £15,397), 20 percent basic (£15,398 to £27,491), 21 percent intermediate (£27,492 to £43,662), 42 percent higher (£43,663 to £75,000), 45 percent advanced (£75,001 to £125,140) and 48 percent top rate (over £125,140). These apply to earned and pension income; dividends and savings are taxed at UK-wide rates.
The 60 percent tax trap is the effective tax rate on income between £100,000 and £125,140, caused by the withdrawal of the personal allowance. For every £2 earned over £100,000, you lose £1 of allowance, which then becomes taxable, so income in this band is effectively taxed at 60 percent. Pension contributions that reduce your income below £100,000 are the most common way to avoid it.
In England, Wales and Northern Ireland, you start paying the 40 percent higher rate on taxable income above £50,270 in 2026/27. Because the personal allowance is £12,570, that equates to a total income of £50,270 before the higher rate applies. In Scotland, the 42 percent higher rate starts lower, at £43,663 of income.
Fiscal drag is the effect of freezing tax thresholds while incomes rise. As your pay increases but the thresholds stay fixed, more of your income is pulled into tax or into higher bands, even though the rates have not officially gone up. With thresholds frozen until 2031, fiscal drag will push many people into the higher-rate band over the coming years.
The personal savings allowance lets basic-rate taxpayers earn £1,000 of savings interest tax-free, higher-rate taxpayers £500, and additional-rate taxpayers nothing. Separately, a starting rate for savings of up to £5,000 at 0 percent may apply if your other income is low. Interest inside an ISA is always tax-free and does not count towards these allowances.
For someone in England earning £60,000 in 2026/27: the first £12,570 is tax-free, the next £37,700 is taxed at 20 percent (£7,540), and the remaining £9,730 above £50,270 is taxed at 40 percent (£3,892). The total income tax is £11,432, with National Insurance charged separately on top. Only the slice above £50,270 is taxed at 40 percent, not the whole income.
You generally need to file a Self Assessment return if you are self-employed, a company director with untaxed income, a landlord, a higher earner, or you have dividends or savings above the allowances that HMRC cannot collect through your tax code. Register by 5 October after the tax year, then file and pay by 31 January. If in doubt, check with HMRC or an accountant.
It depends on your total income, because dividends stack on top of your salary. A director on a £12,570 salary taking £50,000 of dividends in 2026/27 would pay roughly £8,270 in dividend tax: about £4,050 at the 10.75 percent basic rate and about £4,220 at the 35.75 percent higher rate, after the £500 allowance. Since rates rose in April 2026, reviewing your salary and dividend split is worthwhile.
Marriage Allowance lets a spouse or civil partner who does not use their full personal allowance transfer £1,260 of it to a partner who pays the basic rate, saving up to £252 a year. You are eligible if one of you earns below £12,570 and the other earns between £12,571 and £50,270. Claims can be backdated up to four years.
Yes, some already have been announced. From 6 April 2027, tax on savings interest and on property (rental) income will each rise by 2 percentage points to 22, 42 and 47 percent. The threshold freeze also continues to 2031, so fiscal drag will keep increasing bills. Always check GOV.UK for the latest position, as tax policy changes frequently.
Yes. An accountant or tax adviser can make sure you are claiming every allowance and relief you are entitled to, structuring pension contributions and, for business owners, salary and dividends efficiently, using ISAs, and avoiding traps like the 60 percent band. This is legitimate tax planning, using the reliefs the system provides, not avoidance, and it often saves more than it costs.
Yes. Your £12,570 personal allowance can cover any type of taxable income, including dividends and savings interest, not just salary. In practice, income is usually set against the allowance in the most beneficial order, with non-savings income first. Separately, dividends have their own £500 allowance and savings have the personal savings allowance, which sit on top of, not instead of, the personal allowance.
For the 2026/27 tax year, you must register for Self Assessment by 5 October 2027 if you have not filed before, submit your online return and pay any tax due by 31 January 2028, and make payments on account (if applicable) by 31 January and 31 July. Filing on paper has an earlier deadline of 31 October. Missing these dates triggers penalties and interest, so diarise them early.
