As the 2025/26 tax year kicks off (6 April 2025 – 5 April 2026), it’s essential to stay informed about current tax bands, thresholds, and allowances. Whether you’re an employee, self-employed professional, pensioner, or investor, these details affect how much tax you’ll pay.

Key Income Tax Thresholds (England, Wales, Northern Ireland)

  • Personal Allowance: £12,570 tax‑free income
  • Basic Rate (20%): £12,571 – £50,270
  • Higher Rate (40%): £50,271 – £125,140
  • Additional Rate (45%): over £125,140
Note: If your income exceeds £100,000, your Personal Allowance reduces by £1 for every £2 earned—completely disappearing at £125,140

Scotland’s Distinct Tax Bands

Scotland operates with a separate six-band system:

  • Starter (19%): £12,571–£14,732
  • Basic (20%): £14,733–£25,688
  • Intermediate (21%): £25,689–£43,662
  • Higher (42%): £43,663–£125,140
  • Top (47%): over £125,140

Expect “Fiscal Drag”

Frozen thresholds mean that even modest income increases could push you into higher tax brackets—effectively a stealth tax increase

Other Key Allowances

  • Dividend Allowance: £250 tax‑free (down from £500)
  • Personal Savings Allowance: Up to £1,000 tax‑free interest (basic rate), £500 (higher rate), zero for additional-rate
  • Capital Gains Tax (CGT) Exemption: £1,500 annual exempt amount
  • Marriage Allowance: Spouses/civil partners can transfer up to £1,260 (£252 in tax savings)

National Insurance Contributions (NICs)

  • Employees (Class 1): 8% on earnings between £12,570 and £50,270, then 2% above
  • Employers: 13.8% on earnings above £9,100 annually
  • Self-employed: Class 2 abolished from April 2025 (no weekly flat-rate), moving to Class 4 structure.

What This Means Personally

  1. Employees – Keep an eye on any wage raises. Even small increases could push you further into higher tax bands due to frozen thresholds.
  2. High Earners – If you're between £100,000 and £125,140, you effectively face a 60% marginal rate (40% income tax + loss of £1 allowance per £2 income)
  3. Pensioners & Savers – The cut in dividend allowance and CGT exemption means investment taxation is rising subtly.
  4. Married Couples – Don’t forget to use Marriage Allowanceit co uld yield decent savings.

Smart Tax Planning Tips

  • Salary sacrifice — use pension contributions, childcare schemes, or cycle-to-work to cut taxable income.
  • Pension withdrawals — spread them to avoid jumping into a higher bracket.
  • ISA strategy — keep interest and dividends sheltered in ISAs.
  • Charitable Donations — considered gross and could lower your tax footprint.
  • Marriage Allowance — transfer unused allowance where eligible.

Want Tailored Guidance?

No one-size-fits-all solution exists in the world of tax. To dive into personalised strategies—pension optimisation, allowance maximisation and more—schedule a consultation with experts at PHS UK today: Book a Consultation.


Conclusion

The 2025/26 tax year holds no real surprise: the numbers stay frozen, thresholds unchanged, but the tax burden subtly creeps upward. Proactive planning—whether you're an employee, investor or high earner—can help you minimise these stealth increases and keep more of what you earn.