UK Tax Changes 2025/26: What You Need to Know
Complete guide to the latest tax rates, thresholds, and changes affecting your take-home pay this tax year.
Key Changes Summary
✅ Good News
- • Personal allowance remains at £12,570
- • Basic rate threshold frozen at £50,270
- • National Insurance rates stable
- • Employment Rights Act 2025 strengthens worker protections
⚠️ Watch Out
- • Thresholds frozen until 2028 (fiscal drag)
- • More people pushed into higher tax bands
- • New SSP rules from April 2026
- • Student loan repayment threshold adjustments
Income Tax Rates 2025/26
| Tax Band | Income Range | Rate |
|---|---|---|
| Personal Allowance | £0 - £12,570 | 0% |
| Basic Rate | £12,571 - £50,270 | 20% |
| Higher Rate | £50,271 - £125,140 | 40% |
| Additional Rate | £125,141+ | 45% |
Note: The personal allowance reduces by £1 for every £2 earned over £100,000, resulting in an effective 60% marginal tax rate between £100,000 and £125,140.
National Insurance Rates 2025/26
Employee National Insurance (Class 1)
| Income Band | Rate |
|---|---|
| £0 - £12,570 | 0% |
| £12,571 - £50,270 | 8% |
| £50,271+ | 2% |
Self-Employed National Insurance (Class 4)
| Profit Band | Rate |
|---|---|
| £0 - £12,570 | 0% |
| £12,571 - £50,270 | 6% |
| £50,271+ | 2% |
New for 2025/26: Major Changes
📋 Employment Rights Act 2025
The Employment Rights Act 2025 introduces significant worker protections, effective October 2026:
- Day-one protection against unfair dismissal (replaces 2-year qualifying period)
- Predictable hours guarantees for zero-hours workers
- Strengthened collective redundancy protections
- Ban on exploitative "fire and rehire" practices
🏥 Statutory Sick Pay Changes (April 2026)
From April 2026, significant reforms to Statutory Sick Pay:
- SSP paid from day 1 (currently day 4 - no waiting days)
- Rate increases to 80% of weekly earnings (capped at £123.25/week)
- No minimum earnings threshold - all employees eligible
- Lower earners benefit most from the new rules
👶 Maternity Pay Updates
Statutory Maternity Pay rates for 2025/26:
- First 6 weeks: 90% of average weekly earnings (no cap)
- Remaining 33 weeks: £187.18/week or 90% of earnings (whichever is lower)
- Total duration: 39 weeks of paid leave
- Eligibility: £125/week minimum earnings threshold
Student Loan Repayments 2025/26
| Plan Type | Threshold | Rate |
|---|---|---|
| Plan 1 | £24,990/year | 9% |
| Plan 2 | £27,295/year | 9% |
| Plan 4 (Scotland) | £31,395/year | 9% |
| Plan 5 (Post-2023) | £25,000/year | 9% |
| Postgraduate Loan | £21,000/year | 6% |
The Impact of Frozen Thresholds (Fiscal Drag)
With thresholds frozen until April 2028 and average earnings rising, more taxpayers are being pushed into higher tax bands - a phenomenon known as "fiscal drag."
Example: Impact of Wage Growth
If you earn £48,000 in 2025/26 and receive a 4% pay rise:
- New salary: £49,920 (still in basic rate)
- With another 4% rise in 2026/27: £51,917 (now in higher rate band)
- You'll pay 40% tax on income over £50,270 despite real wages barely keeping up with inflation
- This affects approximately 3.2 million additional taxpayers by 2028
Tax Planning Tips for 2025/26
Maximize Pension Contributions
Pension contributions reduce your taxable income and receive tax relief at your marginal rate. Annual allowance: £60,000.
Use Salary Sacrifice Schemes
Reduce your gross salary for benefits like cycle-to-work, electric vehicles, or additional pension contributions to save on tax and NI.
Utilize Your ISA Allowance
Save up to £20,000 tax-free in ISAs for the 2025/26 tax year. Earnings and withdrawals are completely tax-free.
Marriage Allowance
Transfer £1,260 of personal allowance to your spouse/civil partner if they earn less than £12,570, saving up to £252/year.
Capital Gains Tax Allowance
Annual CGT exemption: £3,000 for 2025/26. Consider timing asset sales to maximize tax-free gains.
Calculate Your Take-Home Pay
Use our free UK tax calculator to see exactly how these changes affect your take-home pay for 2025/26.
Try Calculator →Frequently Asked Questions
When does the 2025/26 tax year start?
The UK tax year runs from April 6, 2025 to April 5, 2026.
Has the personal allowance increased?
No, the personal allowance remains frozen at £12,570 until April 2028 as part of the government's fiscal policy.
When do the new SSP rules take effect?
The new Statutory Sick Pay rules come into effect from April 6, 2026 (the start of the 2026/27 tax year), not during 2025/26.
How does fiscal drag affect me?
As wages rise with inflation but tax thresholds stay frozen, more of your income gets taxed at higher rates. This means wage increases don't translate fully into increased take-home pay.
Are Scottish tax rates different?
Yes, Scotland has different income tax rates and bands. Scottish taxpayers should check the Scottish government website for specific rates.
Stay Informed
Tax rules and rates can change throughout the year. Bookmark this page and check back regularly for updates.
Disclaimer: This guide is for informational purposes only and should not be considered financial advice. Always consult with a qualified tax professional for personalized guidance. Information accurate as of April 2025.