UK Personal Tax Allowances and Thresholds 2026-27: Everything You Need to Know

The 2026-27 tax year began on 6 April 2026. The personal allowance — the amount you can earn before paying income tax — remains frozen at £12,570 for the sixth consecutive year.

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Income Tax Rates and Thresholds 2026-27

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| Band | Income | Rate | |——|——–|——| | Personal Allowance | Up to £12,570 | 0% | | Basic Rate | £12,571 – £50,270 | 20% | | Higher Rate | £50,271 – £125,140 | 40% | | Additional Rate | Over £125,140 | 45% |

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Scotland has different rates: starter rate (19%), basic (20%), intermediate (21%), higher (42%), advanced (45%), and top rate (48%).

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The Fiscal Drag Effect

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With the personal allowance frozen since 2021 and wages rising with inflation, more people are being pulled into higher tax bands — a process economists call 'fiscal drag' or the 'stealth tax'.

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An estimated 2.8 million additional people have become higher rate taxpayers since the freeze began. A worker earning £50,000 today pays income tax of around £7,686 — they would pay £7,286 if the allowance had risen with inflation.

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Key Allowances for 2026-27

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**Personal Savings Allowance**: £1,000 for basic rate taxpayers, £500 for higher rate, nil for additional rate taxpayers.

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**Dividend Allowance**: £500 — the tax-free amount of dividend income (reduced from £1,000 in 2023-24).

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**Capital Gains Tax Annual Exempt Amount**: £3,000 (reduced from £12,300 in 2022-23).

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**ISA Allowance**: £20,000 per person per year — unchanged.

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**Pension Annual Allowance**: £60,000 per year (or 100% of earnings if lower).

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