The tax year 2025/26 brings important considerations for UK taxpayers. Understanding your personal allowance UK 2025 / 2026 is important for financial planning. This guide explains UK income tax thresholds 2025 and what they mean for you.
What is Personal Allowance UK?
Personal allowance is the amount you earn tax-free each year. For 2025/26, the standard UK tax-free allowance 2025 remains at £12,570. This means you pay no income tax on the first £12,570 of your earnings.
The personal allowance applies to most UK residents below certain income levels. If your income exceeds £100,000, your allowance begins to reduce.
UK Income Tax Thresholds 2025
Income tax rates depend on how much you earn above your allowance. Different bands apply different percentages to your taxable income. These UK taxable income bands 2025 determine your overall tax liability.
England, Wales and Northern Ireland Income Tax Rates
| Band | Taxable income | Tax rate |
|---|---|---|
| Personal allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
The basic rate limit UK 2025 covers earnings between £12,571 and £50,270. You pay 20% tax on income within this range after your allowance. The higher rate threshold UK 2025 starts at £50,271 of total income.
Income above this level is taxed at 40% until £125,140. Earnings exceeding £125,140 face the additional rate of 45%.
Scotland Income Tax Rates 2025/26
Scotland operates a different system with more tax bands. Scottish residents pay varying rates depending on their income level.
| Band | Taxable income | Tax rate |
|---|---|---|
| Personal allowance | Up to £12,570 | 0% |
| Starter rate | £12,571 to £15,397 | 19% |
| Basic rate | £15,398 to £27,491 | 20% |
| Intermediate rate | £27,492 to £43,662 | 21% |
| Higher rate | £43,663 to £75,000 | 42% |
| Advanced rate | £75,001 to £125,140 | 45% |
| Top rate | Over £125,140 | 48% |
Scottish taxpayers face higher rates on earnings above £43,663. The top rate of 48% applies to income over £125,140 in Scotland.
How Personal Allowance Reduction Works in 3UK?
High earners lose personal allowance gradually through a process called tapering. At what income does UK personal allowance taper off 2025? The reduction begins once your adjusted net income exceeds £100,000.
For every £2 earned above £100,000, you lose £1 of allowance. When do you lose personal allowance UK completely? Your allowance reaches zero at £125,140 or higher income. This creates an effective tax rate of 60% on income between £100,000 and £125,140.
Consider someone earning £110,000 in the 2025/26 tax year. Their income exceeds £100,000 by £10,000. The personal allowance reduces by £10,000 ÷ 2 = £5,000.
Their allowance becomes £12,570 – £5,000 = £7,570. One frequent question which almost everyone of you reading this has is:
If I earn £110,000 how much UK tax will I pay in 2025?
Let’s calculate the tax for a £110,000 salary in England:
First £12,570: £0 (personal allowance applies). However, the reduced allowance is £7,570 due to tapering.
Calculation with reduced allowance:
- £7,570: £0 (reduced personal allowance)
- £7,570 to £50,270: £42,700 at 20% = £8,540
- £50,270 to £110,000: £59,730 at 40% = £23,892
Total tax: £32,432. Take-home pay: £77,568 (before National Insurance)
UK 2025/26 Tax Bands Personal Allowance Basic Higher
The three main bands structure most taxpayers’ liabilities. Personal allowance provides tax-free income up to £12,570. Basic rate applies 20% tax to earnings between £12,571 and £50,270.
Higher rate charges 40% on income from £50,271 to £125,140. Each band only taxes the income falling within its range. You never pay higher rates on your entire income.
Tax band examples
Earning £30,000:
- Personal allowance: £12,570 (tax-free)
- Basic rate: £17,430 at 20% = £3,486 tax
Earning £60,000:
- Personal allowance: £12,570 (tax-free)
- Basic rate: £37,700 at 20% = £7,540
- Higher rate: £9,730 at 40% = £3,892
- Total tax: £11,432
UK Higher Rate Tax Threshold 2025
The higher rate threshold UK 2025 starts at £50,271 for most taxpayers. This represents your total income, not just earnings above the allowance. Once your income reaches £50,271, additional earnings are taxed at 40%.
In Scotland, the higher rate begins lower at £43,663. Scottish higher rate taxpayers face a 42% tax charge.
UK Income Tax 2025/26 allowances beyond Personal Allowance
Several other allowances reduce your tax liability:
Savings allowance
Basic rate taxpayers receive £1,000 tax-free savings interest. Higher rate taxpayers get £500 tax-free interest. Additional rate taxpayers receive no savings allowance.
Dividend allowance
All taxpayers can receive £500 in dividends tax-free. Dividend income above this is taxed at special rates. Basic rate: 8.75%, Higher rate: 33.75%, Additional rate: 39.35%.
Marriage allowance
Lower-earning spouses can transfer £1,260 of allowance. This reduces their partner’s tax bill by up to £252. Both partners must be basic rate taxpayers to qualify.
Trading allowance
Self-employed individuals get £1,000 tax-free trading income. This covers small-scale business activities and freelancing.
Property allowance
Landlords receive £1,000 tax-free rental income. This applies unless you use the Rent a Room scheme.
Frozen Thresholds until April 2028
The government froze most UK income tax thresholds 2025 until 2028. Personal allowances and band limits will not increase with inflation. This policy, called fiscal drag, pulls more taxpayers into higher bands.
Rising wages mean more people pay higher rates despite unchanged thresholds. The freeze is forecast to raise over £1.2 billion by 2028. Originally announced in 2021, the freeze was extended in 2022.
Impact of Frozen Thresholds
Inflation reduces the real value of fixed allowances over time. A 5% wage increase doesn’t bring 5% more take-home pay. More income falls into higher tax brackets each year.
This effectively raises taxes without changing stated rates. Workers earning around £50,000 feel the impact most significantly.
Calculating your Tax Liability
Understanding your position helps with financial planning. Start by identifying your total income from all sources. Deduct your personal allowance if you’re eligible for the full amount.
Apply the relevant tax rates to income in each band. Remember to account for allowance tapering above £100,000.
Steps to calculate tax
National Insurance Contributions alongside Income Tax
National Insurance (NI) adds to your overall tax burden. Employees pay 8% NI on earnings between £12,570 and £50,270. Earnings above £50,270 attract 2% NI.
Self-employed individuals pay different NI rates and thresholds. Combined income tax and NI create your total deduction.
Tax Codes and PAYE
Most employees pay tax through Pay As You Earn (PAYE). Your tax code tells employers how much to deduct. The standard code for 2025/26 is 1257L.
This reflects the £12,570 personal allowance. Check your code regularly to ensure correct deductions. Incorrect codes can mean overpaying or underpaying tax.
Scottish vs rest of UK Differences
Scotland sets its own income tax rates and bands. Personal allowance remains consistent across the UK. Scottish rates generally higher for middle and high earners. Someone earning £50,000 pays more tax in Scotland.
The difference increases significantly above £43,663. Consider your location when planning finances or relocating.
Planning for the 2025/26 Tax Year
Review your expected income and potential tax liability. Consider pension contributions to reduce taxable income. Maximise ISA allowances for tax-free investment growth.
Utilise available allowances before the tax year ends. Speak with a financial adviser for personalised guidance. Understanding these rules helps optimise your tax position.
Frequently asked questions
What is the UK personal allowance in 2025?
The UK personal allowance in 2025/26 is £12,570. This is the amount you can earn without paying income tax. The allowance has been frozen since 2021 and remains unchanged. High earners above £100,000 see their allowance reduced gradually.
How much tax-free income is allowed UK 2025?
Most people can earn £12,570 tax-free in 2025/26. Additional allowances exist for savings interest and dividends. Basic rate taxpayers get £1,000 tax-free savings interest. All taxpayers receive £500 tax-free dividend income. These allowances combine with your personal allowance.
At what income does UK personal allowance taper off 2025?
Personal allowance tapering begins at £100,000 of income. You lose £1 of allowance for every £2 earned above this. The allowance completely disappears at £125,140 income. This affects high earners with effective 60% tax rates.
If I earn £110,000 how much UK tax will I pay 2025?
Someone earning £110,000 in England pays approximately £32,432 income tax. This calculation accounts for the reduced personal allowance. Income above £100,000 triggers allowance reduction.
Your take-home is approximately £77,568 before National Insurance. Scottish residents would pay slightly more due to different rates.
UK higher rate tax threshold 2025 what is it?
The higher rate threshold UK 2025 is £50,271 in England, Wales, Northern Ireland. Income above this level is taxed at 40%. In Scotland, the higher rate threshold is lower at £43,663. Scottish higher rate taxpayers pay 42% on income above this.
What happens if I earn over £125,140?
Earnings above £125,140 lose all personal allowance. In England, Wales, Northern Ireland, you pay 45% on income over this. Scottish taxpayers pay 48% on income exceeding £125,140. This is the highest income tax rate in the UK.
How do frozen thresholds affect my tax?
Frozen thresholds mean allowances don’t increase with inflation. Your wages may rise, but tax bands stay the same. This pushes more income into higher tax brackets. You effectively pay more tax despite unchanged rates. The freeze continues until April 2028.
Can I reduce my tax liability legally?
Yes, several legitimate methods reduce your tax burden. Contribute to pensions to lower taxable income. Use ISAs for tax-free investment returns. Claim all allowances you’re entitled to receive. Consider tax-efficient investment structures with professional advice.
Where can I check my tax code?
Check your tax code on payslips from your employer. HMRC sends a coding notice each tax year. View your code online through your personal tax account. Contact HMRC if your code appears incorrect. Wrong codes can lead to over or underpayment.
Do I need to complete a tax return?
Most employees don’t need to complete self assessment. PAYE automatically deducts the correct tax from salary. Self-employed individuals must file tax returns annually. High earners above £100,000 typically need to file. Multiple income sources may require a return.
Conclusion
Understanding UK personal tax allowances 2025-2026 is essential for financial planning. The frozen thresholds until 2028 mean more taxpayers face higher rates. Personal allowance remains at £12,570 for most earners.
High earners above £100,000 lose allowance through tapering. Different rates apply in Scotland compared to the rest of UK. Use all available allowances to minimise your tax liability. Consider professional advice for complex tax situations. Regular reviews ensure you’re not overpaying on your taxes.