Personal Tax​

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.
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• 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