UK Tax Guide 2026/27
Strategic Analysis of the 2026/27 Fiscal Year & Making Tax Digital Compliance
— ProACT Partnership Tax Team
Personal Income Tax
The Personal Allowance remains frozen at £12,570. For every £2 earned above £100,000, the allowance reduces by £1, disappearing entirely for those earning over £125,140.
| Income Band (£) | Tax Rate | Category |
|---|---|---|
| 0 - 12,570 | 0% | Personal Allowance |
| 12,571 - 50,270 | 20% | Basic Rate |
| 50,271 - 125,140 | 40% | Higher Rate |
| Over 125,140 | 45% | Additional Rate |
Dividend Tax (2026 Update)
The Dividend Allowance remains at £500, but tax rates have increased by 2% for Basic and Higher rate taxpayers this year.
| Band | 2026/27 Rate | Allowance |
|---|---|---|
| Basic Rate | 10.75% | £500 |
| Higher Rate | 35.75% | £500 |
| Additional Rate | 39.35% | £500 |
Making Tax Digital (MTD) for Income Tax
Effective 6 April 2026, Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is now mandatory for certain individuals. You must keep digital records and use compatible software to send quarterly updates to HMRC.
- Phase 1 (April 2026): Mandatory for self-employed and landlords with qualifying income over £50,000.
- Phase 2 (April 2027): Threshold drops to £30,000.
- Requirements: 4 Quarterly updates + 1 Final Declaration per year.
National Insurance (NICs)
| Class | Rate | Threshold |
|---|---|---|
| Class 1 (Employee) | 8% | £12,570 to £50,270 |
| Class 1 (Employer) | 15% | Above £5,000 |
| Class 4 (Self-Employed) | 6% | £12,570 to £50,270 |
Capital Gains & Inheritance Tax
Capital Gains Tax (CGT) annual exempt amount is £3,000. Disposals of residential property are taxed at higher rates than other assets.
| Tax Type | Rate / Allowance | Notes |
|---|---|---|
| Capital Gains (Basic) | 18% | Non-residential assets |
| Capital Gains (Higher) | 24% | Includes Residential Property |
| Inheritance Tax (IHT) | 40% | Over £325,000 (Nil Rate Band) |
| Residence Nil Rate | £175,000 | Passing main home to direct descendants |
Tax Calendar 2026-2027
| Date | Obligation |
|---|---|
| 6 April 2026 | New Tax Year begins & MTD ITSA Launch (£50k+ earners) |
| 31 July 2026 | Second Payment on Account for 2025/26 |
| 7 August 2026 | First MTD Quarterly Update Deadline (for early adopters) |
| 31 January 2027 | Final Deadline for 2025/26 Online Returns & Tax Payment |
| 5 April 2027 | End of 2026/27 Tax Year |
UK Tax: Master FAQ
Yes. If your UK rental income (before expenses) exceeds £50,000, you must comply with MTD digital reporting from April 2026, regardless of where you live.
Because personal allowances and thresholds are frozen until 2028, even modest inflationary pay rises are pushing more taxpayers into higher tax brackets.
Yes. Scotland maintains its own progressive bands (19% to 48%). While the Personal Allowance is UK-wide, the thresholds for the intermediate and higher rates differ significantly from England and Wales.
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Tax rates & allowances for 2023-24
Income tax
Personal allowance: £12,570 - 0%
Basic rate band: £12,571 - 50,270 - 20%
Higher rate bane: £50,271 - 125,140 - 40%
Additional rate: over £125,140 - 45%
National insurance
Employees
National insurance was reduced from 12% to 10% from 6 January 2024.
6 April 2023 - 5 January 2024 - 12%
6 January 2024 - 5 April 2024 - 10%
Employers
2023-24 - 13.8%
Self-Employed
Self employed people in the UK pay 2 classes of national insurance depending on their profit.
CLASS 2
Self employed people in the UK pay class 2 contributions of £3.45 per work when their profit exceeds £12,570
Small Profits Threshold (per year) - £6,725
Lower Profits Threshold (per year) - £12,570 - Rate (per week) - £3.45
CLASS 4
Self employed people in the UK also pay Class 4 contributions of 9% on profit between £12,570 & £50,270 & 2% on profits above £50,270.
Lower Profits Limit - £12,570 - Rate: 9%
Upper Profits Limit - £50,270 - Rate: 2%
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