UK Tax Changes April 2026: What's New and How It Affects Your Take-Home Pay
Every tax change from 6 April 2026 explained: frozen thresholds, dividend tax rises, NLW increase to £12.71/hr, MTD launch, homeworking relief scrapped. Worked examples at real salaries.
Last updated: February 2026
The 2026/27 tax year begins on 6 April 2026. While headline income tax rates remain unchanged, a series of shifts across National Insurance, dividends, the National Living Wage, and new compliance obligations mean most workers will notice a difference in their pay packet. Here is everything changing and what it means in real terms.
Income Tax Bands: Frozen Again
The Personal Allowance stays at £12,570 and the higher rate threshold at £50,270 for 2026/27. These thresholds have been frozen since 2021/22 and will remain so until at least 2028, according to HM Treasury. With average wages rising by around 3.8% (ONS, January 2026), more people are being pulled into higher tax bands each year through what economists call fiscal drag.
| Band | Taxable 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% |
If you earn over £100,000, your Personal Allowance is reduced by £1 for every £2 above that threshold, disappearing entirely at £125,140. This creates an effective 60% marginal rate in that band. See our £100k tax trap guide for strategies to manage this.
National Insurance: No Change for Employees
Employee National Insurance rates remain at 8% on earnings between £12,570 and £50,270, and 2% above that. The Primary Threshold and Upper Earnings Limit are unchanged.
Employer NI continues at 15% on earnings above £5,000 (the secondary threshold dropped from £9,100 to £5,000 in April 2025). This increased cost of employment may indirectly affect pay rises and hiring decisions. Self-employed Class 2 NI remains abolished, with Class 4 at 6% up to £50,270 and 2% above. See our National Insurance guide for full details.
National Living Wage Rises to £12.71/hr
From 1 April 2026, the National Living Wage for workers aged 21 and over increases from £12.21 to £12.71 per hour, a rise of 4.1% (source: Low Pay Commission, confirmed by the Department for Business and Trade). The government estimates this will boost annual gross earnings for full-time workers on this rate by approximately £900.
| Category | 2025/26 Rate | 2026/27 Rate | Change |
|---|---|---|---|
| 21 and over (NLW) | £12.21 | £12.71 | +4.1% |
| 18-20 | £10.00 | £10.36 | +3.6% |
| Under 18 | £7.55 | £7.82 | +3.6% |
| Apprentice | £7.55 | £7.82 | +3.6% |
For someone on the NLW working 37.5 hours per week, that works out to approximately £24,785 gross per year. After tax and NI, the monthly take-home would be around £1,788. Use our salary calculator to check the exact figure for your hours.
Dividend Tax Rates Increase
From 6 April 2026, dividend tax rates rise by 2 percentage points across the basic and higher bands (source: Finance Act 2026, confirmed by CIOT and Armstrong Watson):
| Band | 2025/26 Rate | 2026/27 Rate |
|---|---|---|
| Basic rate | 8.75% | 10.75% |
| Higher rate | 33.75% | 35.75% |
| Additional rate | 39.35% | 39.35% |
The tax-free Dividend Allowance remains at £500. This change particularly affects company directors who draw a combination of salary and dividends. For a director taking £50,000 in dividends (above the allowance), the additional tax bill is approximately £990 per year. Read our dividend tax guide for worked examples and extraction strategies.
Working From Home Tax Relief Scrapped
From 6 April 2026, the income tax relief for employees who work from home and are not reimbursed by their employer is being discontinued (source: CIOT). Previously, workers could claim a flat-rate deduction of £6 per week without receipts, saving basic rate taxpayers around £62 per year (£124 for higher rate taxpayers).
Around 300,000 people currently claim this relief, down from nearly 3 million at the pandemic peak. Note that employer reimbursements for homeworking costs remain tax-free — this change only affects employees claiming the relief directly through HMRC.
Making Tax Digital Begins
April 2026 marks the launch of Making Tax Digital (MTD) for Income Tax. Self-employed individuals and landlords with gross annual income over £50,000 must now keep digital records and submit quarterly summaries to HMRC via compatible software (source: HMRC, CIOT). This replaces the single annual Self Assessment return with four quarterly updates plus a final declaration.
The threshold drops to £30,000 from April 2027 and £20,000 from April 2028. HMRC estimates around 900,000 taxpayers will be affected in this first phase. If you are self-employed, see our Making Tax Digital guide for what software you need and how to prepare.
Scottish Income Tax Bands Widen
Scotland has increased its starter rate band limit by 7.4% and its basic rate band limit by 7.4%, both well above inflation. The starter band now runs to £16,537 (up from £15,397) and the basic rate band to £29,526 (up from £27,491). Higher, advanced, and top rate thresholds remain frozen.
The maximum annual saving from these band changes is approximately £168 per year for Scottish taxpayers earning above £43,663. Around 55% of Scottish taxpayers pay less income tax than they would in England. See our Scottish Income Tax 2026/27 guide for the full comparison.
Student Loan Thresholds
Student loan repayment thresholds for 2026/27 remain broadly unchanged from 2025/26:
| Plan | Annual Threshold | Rate |
|---|---|---|
| Plan 1 (pre-2012) | £24,990 | 9% |
| Plan 2 (post-2012) | £27,295 | 9% |
| Plan 4 (Scotland) | £31,395 | 9% |
| Plan 5 (from Sept 2023) | £25,000 | 9% |
| Postgraduate Loan | £21,000 | 6% |
If you are on Plan 5, this is the newer loan type with a 40-year write-off period and interest capped at RPI only. For full details on how repayments work at different salary levels, see our student loan repayment guide.
Other Changes Worth Noting
- Council tax: Most English councils are raising bills by 4.99%, the maximum permitted without a referendum. Scottish increases range from 4% to 10%, and Welsh increases from 3.5% to 6.5% (source: Press Association analysis, The Scotsman, Yahoo News UK).
- State Pension: The new State Pension rises to £230.25 per week (approximately £11,973 per year) under the triple lock guarantee.
- ISA allowance: Remains at £20,000. The Lifetime ISA limit stays at £4,000.
- Pension Annual Allowance: Stays at £60,000. The tax-free lump sum cap is £268,275.
- Capital Gains Tax annual exempt amount: Remains at £3,000. Business Asset Disposal Relief rate rises from 14% to 18% (source: Armstrong Watson).
- Vehicle Excise Duty: Standard yearly rate increases from £195 to £200 (source: CIOT).
- Inheritance Tax on farms and businesses: APR and BPR relief capped at £2.5 million per person. Qualifying assets above this receive 50% relief, resulting in a 20% effective IHT rate on the excess (source: Finance Act 2026).
Worked Examples: Take-Home Pay at Key Salaries
Here is what you can expect to take home each month in 2026/27 at common salary levels (assuming no student loan, no pension contributions, standard tax code 1257L):
| Gross Salary | Income Tax | Employee NI | Annual Take-Home | Monthly Take-Home |
|---|---|---|---|---|
| £20,000 | £1,486 | £595 | £17,919 | £1,493 |
| £30,000 | £3,486 | £1,395 | £25,119 | £2,093 |
| £50,000 | £7,486 | £2,995 | £39,519 | £3,293 |
| £75,000 | £17,432 | £3,489 | £54,079 | £4,507 |
| £100,000 | £27,432 | £3,989 | £68,579 | £5,715 |
These figures are identical to 2025/26 because neither income tax rates nor employee NI rates have changed. The real impact of frozen thresholds is felt when your salary increases — any pay rise is taxed at your marginal rate while the tax-free amount stays the same.
Use our salary calculator to see your exact take-home pay for 2026/27, including student loan deductions, pension contributions, and Scottish tax rates.
For a deeper understanding of how income tax is calculated at each band, see our how much tax do I pay guide. If you are planning salary or career changes, CareerMetrics has detailed salary data by occupation to help you benchmark, and our salary sacrifice guide explains how to reduce your tax bill through pension and benefit contributions.
Frequently Asked Questions
What are the UK income tax rates for 2026/27?
The rates are unchanged: 20% basic rate on income from £12,571 to £50,270, 40% higher rate from £50,271 to £125,140, and 45% additional rate above £125,140. The Personal Allowance remains frozen at £12,570.
What is the National Living Wage from April 2026?
The National Living Wage increases to £12.71 per hour from 1 April 2026 for workers aged 21 and over, up from £12.21 — a 4.1% rise confirmed by the Low Pay Commission.
Are dividend tax rates changing in April 2026?
Yes. The basic rate rises from 8.75% to 10.75% and the higher rate from 33.75% to 35.75%. The additional rate stays at 39.35%. The tax-free Dividend Allowance remains £500.
Has the working from home tax relief been scrapped?
Yes. From 6 April 2026, employees can no longer claim the £6 per week flat-rate tax relief for working from home. Employer reimbursements for homeworking costs remain tax-free.
Who needs to use Making Tax Digital from April 2026?
Self-employed individuals and landlords with gross annual income over £50,000 must keep digital records and submit quarterly updates to HMRC via compatible software. The threshold drops to £30,000 from April 2027.
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