Taxes on Income – What Individuals Need to Know for 2026/27 and Beyond

The government has confirmed a number of important changes affecting how individuals are taxed on their income over the coming years. While some thresholds remain frozen, several reforms take effect from April 2026 and April 2027 that could influence take-home pay, savings behaviour and wider financial planning. Below is a summary of the key points.

Personal Allowance

 The standard personal allowance – the amount you can earn tax-free – remains at £12,570 for 2026/27.

However, individuals earning over £100,000 will see their allowance reduced, with the benefit lost entirely once income exceeds £125,140.

Income Tax Bands and Rates

 Tax thresholds are unchanged for 2026/27 and are expected to stay frozen until 2030/31.

After your personal allowance, your income is taxed across the following bands:

Band	Income range	Other/salary income	Savings	Dividends (from April 2026)
Basic rate	£1 – £37,700	20%	20%	10.75% (up from 8.75%)
Higher rate	£37,701 – £125,140	40%	40%	35.75% (up from 33.75%)
Additional rate	Over £125,140	45%	45%	39.35%

‘Other income’ includes salary and bonuses, business profits, pensions, rental receipts and most miscellaneous income streams.

Scottish taxpayers should note that income tax on earnings is set separately, with 2026/27 rates still to be announced.

Changes Coming in 2027/28

From 6 April 2027, the government will:

·      Introduce separate tax rates for property income

·      Increase tax rates on savings income

For England and Northern Ireland, the proposed income tax rates for property and savings will be:

Band	Income range	Property & savings tax
Basic	£1 – £37,700	22%
Higher	£37,701 – £125,140	42%
Additional	Over £125,140	47%

Scotland and Wales will set their own rates for property income.

Allowances for Savings and Dividends

The following tax-free allowances remain unchanged:

• Personal savings allowance:

  • £1,000 for basic rate taxpayers

  • £500 for higher rate taxpayers

  • Not available at additional rate

• Dividend allowance: £500
  

National Insurance for the Self-Employed

Self-employed individuals continue to pay Class 4 NICs alongside income tax.

For 2026/27:

• 6% on profits between £12,570 and £50,270

• 2% on profits above £50,270
  

These thresholds will stay frozen until 2030/31.

Voluntary NICs - from April 2026:

• Class 2 increases to £3.65 per week

• Class 3 rises to £18.40 per week
  

People living abroad will no longer be able to make Class 2 voluntary payments, and the qualifying UK residency period rises from 3 to 10 years.

ISA Allowances

Income earned within an ISA remains free of income tax.

• Annual ISA allowance in 2026/27: £20,000

• From April 2027:

  • Cash ISA limit will be restricted to £12,000

  • Savers aged 65+ can continue contributing up to £20,000 into cash ISAs
    

Pension Contribution Relief

Tax relief remains available in full on eligible pension contributions, reinforcing pensions as a key tool for long-term tax-efficient planning.

Child Benefit and the High Income Charge

The High-Income Child Benefit Charge (HICBC) continues to apply if income exceeds £60,000 and Child Benefit is being claimed in the household.

• For every £200 of income above £60,000, 1% of Child Benefit must be repaid

• Benefit is fully withdrawn once income exceeds £80,000
  

Qualifying Care Relief

Foster carers and shared lives carers will see relief increase by 3.8% in April 2026, in line with inflation.

Penalties for Late Filing and Payment

From April 2027, a revised penalty system will apply to all Self Assessment taxpayers:

• Late filing penalties become more lenient

• Late payment penalties become tougher and more costly
  

Understanding and managing deadlines will become increasingly important.

Venture Capital Trusts

From April 2026, the income tax relief available on qualifying VCT investments will reduce from 30% to 20%.

What This Means for You

With freezes to thresholds, higher dividend and future property/savings rates, and changes in reliefs and penalties, many taxpayers may find themselves paying more tax without any increase in earnings.

Now is a good time to:

• Review income and allowances

• Consider pension contributions and tax-efficient investments

• Check eligibility for Child Benefit and related charges

• Plan ahead for 2027 changes
  

If you’d like help understanding how these updates affect your position, SJC, Chartered Accountants can advise on planning strategies tailored to your personal situation.