Tax changes 2025/26

As the 2025/26 tax year begins, this blog post reviews the upcoming changes to personal, corporate, and national insurance taxation.

Personal tax

As shown in the table below, the percentages and the Personal Allowance threshold remain unchanged from the previous tax year.

Please note that the changes in Scottish tax has not been taken into account in this post.

Similar to the previous tax year, if you earn additional income as your salary, any amount over £12,570 will be taxed at the basic rate of 20% up to £50,270. There is a modification in the higher tax rate of 40%, which now only applies to earnings up to £125,140, while the additional tax rate of 45% is applicable to earnings above £125,140.

The income limit for personal allowance remains unchanged. As before, the personal allowance begins to decrease on earnings above £100,000, reducing by £1 for every £2 of earnings, and is reduced to £0 at £125,140 and above.

The dividend allowance remains at £500, meaning the initial £500 in dividends is taxed at 0%. The dividend rates remain unchanged from last year.

National Insurance bands

The thresholds for employee National Insurance remain unchanged from the previous year at £12,570 per annum. This means that employees will not pay either income tax or National Insurance contributions on any earnings up to £12,570.

This year, the Employment Allowance has risen to £10,500, maintaining the same additional restriction as last year. This means it is not available to businesses where the only person on the payroll is also a director, such as 'single director employee' limited companies. However, it is no longer limited to employers whose total secondary Class 1 liability in the previous tax year was under £100,000.

National Insurance for Self-employed

Class 2 NI is no longer mandatory, but you can choose to make a voluntary contribution, and the rate remains unchanged from the previous tax year.

Class 4 NI rates stay the same as in the previous years and is still payable in addition to class 2 NI.

Capital gains tax

The capital gains tax exemption threshold remains unchanged at £3,000, the same as last year.

If you fall within the basic tax rate bracket, earning between £12,571 and £50,270, you will pay an 18% rate on gains from residential properties and a 10% rate on gains from other assets.

If your income exceeds £50,270, placing you in the higher or additional tax rate bracket, you will be subject to a 24% rate on residential property gains and a 20% rate on gains from other assets.

Pension contributions

The annual pension contribution allowance remains at £60,000 per year, while the standard individual lump sum allowance continues to be £268,275. Additionally, the standard individual lump sum and death benefit allowance is unchanged at £1,073,100.

Corporation tax

The corporation tax rates stay the same:

- companies with profits of £50,000 or less will continue to pay corporation tax at 19%

- companies with profits between £50,000 and £250,000 will pay corporation tax at 25% but marginal relief will apply

- the rate will increase in bands, with businesses whose profits are greater than £250,000 paying maximum of 25% corporation tax.

VAT

The registration threshold remains at £90,000, while the de-registration threshold is £88,000.

ISA

The ISA annual limit stays at the same level of £20,000, as well as Junior ISA of £9,000 annually.

The rates should be used as guidance only as it may change in individual circumstances.