In the Autumn Budget 2025, Chancellor Rachel Reeves set out tax-raising measures worth up to £26 billion, with some coming into force this April and others further in the future.
The Clayton & Brewill team have set out the upcoming personal tax changes that may be relevant to you in the blog below, take a look to learn more about these changes.
Tax bands and rates
The basic rate band remains at £37,700, with the higher rate threshold remaining at £50,270 and the additional rate threshold remaining at £125,140. The freeze of these thresholds will continue until April 2031. The NICs Primary Threshold and Lower Profits Limit remain at £12,250 and the NICs Upper Earnings Limit and Upper Profits Limit will remain aligned to the higher rate threshold at £50,270 as well. Other employer NICs relief thresholds aligned to the Upper Earnings Limit will also be maintained at this level.
The additional rate for non-savings and non-dividend income will apply to taxpayers in England, Wales and Northern Ireland. The additional rate for savings and dividend income will apply to the whole of the UK.
The personal allowance
The Income Tax personal allowance is fixed at the current level of £12,570 and will remain frozen until April 2031.
There is a reduction in the personal allowance for those with ‘adjusted net income’ over £100,000. The reduction is £1 for every £2 of income above £100,000. This means that there is no personal allowance where adjusted net income exceeds £125,140.
The government will increase the married couple’s allowance and blind person’s allowance from 6 April 2026 by the CPI rate for September 2025 of 3.7%.
Tax on property income
Property income is any income from letting land and buildings – individuals have a Property Allowance which exempts property income of £1000 or less. Property income over £1000 can be offset either by the £1000 Property Allowance or by deducting relevant expenses.
The government is introducing the following separate tax rates for property income from 2027/28:
- 22% for basic rate taxpayers
- 42% for higher rate taxpayers
- 47% for additional rate taxpayers
Tax on savings income
Savings income is income such as bank and building society interest. The Savings Allowance applies to savings income and the available allowance in a tax year depends on the individual’s marginal rate of Income Tax.
Typically, individuals taxed up at the basic rate of tax have an allowance of £1000 and for higher rate taxpayers the allowance is £500. No allowance is due to additional rate taxpayers.
Savings income within the allowance still counts towards and individual’s basic or higher rate band and so may affect the rate of tax paid on savings above the Savings Allowance.
Some individuals qualify for a 0% starting rate of tax on savings income up to £5000, which will remain at £5000 until 5 April 2031. However, the rate is not available if taxable non-savings income (earnings, pensions, trading profits and property income, less allocated allowances and reliefs) exceeds £5000.
The current tax rates on savings income will be maintained for 2026/27. From April 2027, there will be a 2% increase in the applicable tax rates – the basic rate will increase to 22%, the higher rate will increase to 42% and the additional rate will increase to 47%.
Tax on dividends
Currently, the first £500 of dividends is chargeable to tax at 0% (the Dividend Allowance). This £500 is retained for 2026/27 and these rules apply to the whole of the UK.
From 6 April 2026, there will be a 2% increase in the ordinary and upper rates of Income Tax applicable to dividends while the additional rate will remain unchanged at 39.35%.
Dividends received above the Dividend Allowance will be taxed at the following rates for 2026/27:
- 75% for basic rate taxpayers
- 75% for higher rate taxpayers
- 35% for additional rate taxpayers
Dividends within the allowance still count towards an individual’s basic or higher rate band and so may affect the rate of tax paid on dividends above the Dividend Allowance. To determine which tax band dividends fall into, they are treated as the last type of income to be taxed.
Income Tax ordering rules
The Income Tax ordering rules will change from 6 April 2027. The personal allowance will be deducted from employment, trading or pension income first. Currently, individuals can choose which income the allowance is offset against.
Pension tax limits
For 2026/27 pension tax limits include:
- The Annual Allowance (AA) is £60,000
- Individuals who have ‘threshold income’ for a tax year of greater than £200,000 have their AA for that tax year restricted. It is reduced by £1 for every £2 of ‘adjusted income’ over £260,000 to a minimum AA of £10,000
- The Lump Sum Allowance, which relates to the general maximum amount that may be able to be taken as a tax-free lump sum, is £268,275
- The Lump Sum and Death Benefit Allowance, which relates to the general maximum that may be able to be taken as a tax-free lump sum in certain circumstances, is £1,073,100
Individual Savings Accounts
For 2026/27, the limits are as follows:
- Individual Savings Accounts (ISAs) £20,000
- Junior ISAs £9000
- Lifetime ISAs £4000 (excluding government bonus)
- Child Trust Funds £9000
These limits will be frozen until 5 April 2031.
From April 6 2027, the annual ISA cash limit will be set at £12,000. The remaining £8000 will be designated for stocks and shares ISA investment. This restriction will not apply for those over the age of 65, where the cash ISA limit will remain at £20,000.
