There were relatively few headline changes for the 2026/27 tax year. However, the continued freeze on key thresholds, combined with high inflation, continues to deliver stealth tax rises through fiscal drag. The most significant practical change is the mandatory rollout of Making Tax Digital (MTD) for Income Tax. This article summarises the main rates, thresholds and updates relevant to taxpayers in England, Wales and Northern Ireland.

Income Tax and National Insurance

The personal allowance remains frozen at £12,570. The standard tax code is therefore still 1257L.

• £12,571 – £50,270: 20%
• £50,271 – £125,140: 40%
• Above £125,140: 45%

The personal allowance is reduced by £1 for every £2 of income above £100,000 and is fully withdrawn at £125,140. This creates an effective marginal rate of up to 60% in the taper band.

The National Insurance primary threshold for employees is also £12,570. Employees pay no NIC below this level. The employer secondary threshold remains £5,000 per year (£417 per month).

• Employee NIC rate: 8% (between the primary threshold and upper earnings limit), then 2% above
• Employer NIC rate: 15% on earnings above the secondary threshold
• Employment Allowance: £10,500 per year (subject to eligibility rules)

ISA Allowance

Unchanged. The annual ISA contribution limit remains £20,000.

Marriage Allowance

Still £1,260. A basic-rate taxpayer can transfer this portion of their unused personal allowance to their spouse or civil partner (provided the recipient is not a higher- or additional-rate taxpayer).

Self-Employed

Class 2 National Insurance is voluntary. The rate is £3.65 per week.

Class 4 NIC rates:

• 6% on profits between £12,570 and £50,270
• 2% on profits above £50,270

Self-employed individuals with profits at or above the small profits threshold (£7,105 for 2026/27) receive National Insurance credits that protect their State Pension record, even if they do not pay Class 2 contributions. Those with profits below this threshold may still choose to pay Class 2 voluntarily.

VAT

• Registration threshold: £90,000
• Deregistration threshold: £88,000

(These thresholds have been frozen since April 2024.)

Limited Companies

Corporation Tax rates remain:

• 19% on profits up to £50,000 (small profits rate)
• 25% on profits above £250,000 (main rate)
• Marginal relief applies between £50,000 and £250,000, producing an effective rate of approximately 26.5% on profits in that band.

Dividend allowance: £500.

Dividend tax rates (increased from 6 April 2026):

• Basic rate: 10.75% (previously 8.75%)
• Higher rate: 35.75% (previously 33.75%)
• Additional rate: 39.35% (unchanged)

Wages and Employment

National Living Wage (age 21 and over): £12.71 per hour (from 1 April 2026).

Automatic Enrolment

Employers must automatically enrol eligible employees earning more than £10,000 a year into a workplace pension. Minimum contribution rates remain 5% employee + 3% employer (total 8% of qualifying earnings).

Capital Gains Tax

Annual exempt amount: £3,000.

Main rates:

• 18% where total taxable income and gains fall within the basic-rate band
• 24% above that threshold

Our Recommendations

Limited companies Because the employer secondary threshold is only £5,000, a sole-director company with no other employees cannot claim the Employment Allowance. Any salary above £417 per month therefore attracts 15% employer NIC.

One practical solution is to employ a second person (even on a temporary or low-hours basis) who earns at least £417 per month, thereby creating eligibility for the allowance and potentially eliminating the employer NIC cost on the director’s salary.

Self-employment Self-employment remains relatively attractive due to the lower Class 4 rates (6%/2%) and the absence of employer NIC or dividend tax. In some cases directors may consider operating via a genuine contract for services rather than taking dividends. Care is required: employment status (IR35) rules must be properly considered and documented.

Making Tax Digital A major change for self-employed individuals and landlords with qualifying income over £50,000 is the start of mandatory Making Tax Digital for Income Tax from 6 April 2026. The first quarterly update is due by 7 August 2026. Digital record-keeping and compatible software are now essential. Further detail is available in our dedicated MTD articles.

Dividends Given the 2 percentage point increase in the basic and higher rates, we generally recommend keeping dividend extractions within the £500 annual allowance where possible.

If you have any questions about how these changes affect your position, please contact us by email.

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