Personal Income Tax Tax rates and allowances – 2026/27 (Table A)
In 2023, the previous Chancellor announced that the main personal allowance and the 40% threshold will remain at their 2022/23 levels until the end of 2027/28. In a major tax raising measure, Chancellor Reeves has extended this freeze to the end of 2030/31, in spite of stating explicitly in last year’s Budget that the normal increases in the thresholds would resume in April 2028. This has been widely criticised as a ‘stealth tax’, in that it increases the amount collected without explicitly increasing rates or reducing allowances. For example, a person with a salary of £50,270 will pay £7,540 in income tax in 2025/26; if their income increases by 10% to £55,297 in any of the years to 2030/31, all of the increase will be taxed at 40%, and they will pay £9,551. The forecasts accompanying the Budget show expected revenue of over £12 billion from this in 2030/31, the largest tax-raising measure in the table. The income level above which the personal allowance is tapered away also remains £100,000; it will be reduced to zero when income is £125,140, which is also the threshold for paying 45% tax. In the tapering band, the loss of tax-free allowance creates an effective marginal rate of 60%. Once again, annual increases in income will bring more people into these higher rates. Dividend income The dividend allowance exempts some dividend income from tax, although that income still counts towards the higher rate thresholds. For 2026/27, the allowance is unchanged at £500. As HMRC does not routinely receive information about dividends received by taxpayers, this low limit is likely to require people to file tax returns to declare even small tax liabilities on dividends. In 2026/27, the basic and higher rates on dividend income over £500 will rise by 2% to 10.75% and 35.75%; the additional rate will remain 39.35%. The higher rate also applies to tax payable by close companies (broadly, those under the control of five or fewer shareholders) on ‘loans to participators’ that are not repaid to the company within 9 months of the end of the accounting period. This therefore also increases to 35.75% from 6 April 2026. Dividends arising in an ISA or a qualifying VCT are not taxed and do not count towards the allowance. Savings income and property income The savings allowance remains £1,000 for basic rate taxpayers, £500 for 40% taxpayers and nil for 45% taxpayers. People with savings income above these limits may have to declare it in order to pay tax. The savings rate band remains at £5,000. Non-savings income is treated as the ‘first slice’ of income, using the tax-free allowance and the savings rate band; if any of the £5,000 band is not used by this ‘slice’, any savings income falling within that band is taxed at 0%. The Chancellor announced an increase in the tax rates applicable to income from
AUTUMN BUDGET 26 NOVEMBER 2025
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