Personal Tax Changes in 2025/26
Income Tax Thresholds and Rates
- Personal Allowance remains frozen at £12,570 for the 2025/26 tax year, with no change since 2022—and set to stay frozen until at least April 2028.
- Tax bands unchanged:
- Basic Rate (20%): up to £50,270
- Higher Rate (40%): £50,271 to £125,140
- Additional Rate (45%): above £125,140
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- Fiscal drag remains significant: with thresholds frozen, many low- and middle-income earners are pushed into higher tax brackets or start paying income tax sooner, increasing their tax burden over time.
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National Insurance Contributions (NICs)
- Employee NIC continues at 8% on earnings between £12,570 and £50,270, then 2% on earnings above that—unchanged from the previous year.
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Dividend Allowance
- The dividend allowance has dropped sharply—from £2,000 in 2017/18 to just £500 in 2024/25—leading to a sharp rise in taxpayers (estimated 3.7 million people) now paying dividend tax.
- Dividend tax rates are: 8.75%, 33.75%, and 39.35% for basic, higher, and additional-rate taxpayers respectively.
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Non-Dom Tax Regime Reform
- The non-domicile regime was abolished on 6 April 2025, ending the preferential treatment of overseas income for long-term non-UK domiciled individuals.
- It’s replaced by a residence-based tax system, including a Temporary Repatriation Facility (TRF)—allowing foreign income and gains to be taxed at 12% (rising to 15% in 2027/28) if brought into the UK during the transitional period.
The Guardian+15KPMG+15EY UK+15 - The government expects the reform to raise around £33 billion over five years from this change. Early data suggests fewer high-net-worth individuals have left the UK than anticipated.
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Other Personal Tax Adjustments
- Simplification Measures: Administrative updates announced in Spring 2025 aim to streamline tax filing and HMRC processes—though not affecting tax liabilities, these reduce complexity and compliance effort.
GOV.UK - Tax Penalties for Late Payments: From 6 April 2025, penalties for late VAT or self-assessment tax payments have increased:
- 3% after 15 days
- an additional 3% after 30 days
- plus 10% annual interest on debts overdue by 31+ days
