Introduction
The 2025/26 tax year brings a number of important changes that every business owner and individual should be aware of. With income tax thresholds frozen until 2028 and significant employer NIC increases now in force, proactive planning is more important than ever.
Income Tax Rates & Allowances 2025/26
Personal Allowance
The Personal Allowance remains frozen at £12,570. This is the amount of income you can earn each year before paying Income Tax. The allowance tapers away for those earning over £100,000 and is fully removed at £125,140.
Income Tax Bands
- Basic Rate (20%) — £12,571 to £50,270
- Higher Rate (40%) — £50,271 to £125,140
- Additional Rate (45%) — Over £125,140
Because thresholds are frozen while wages rise, many more people are being dragged into higher tax bands — a process known as "fiscal drag". Review your salary structure and consider strategies to mitigate this.
National Insurance Contributions (NIC) 2025/26
Employee NIC
The employee NIC rate is 8% on earnings between £12,570 and £50,270, and 2% above that threshold.
Employer NIC — Major Change
From April 2025, employer National Insurance increased from 13.8% to 15%. Additionally, the secondary threshold (the earnings level at which employers start paying NIC) was reduced from £9,100 to £5,000. This significantly increases payroll costs for most businesses.
However, the Employment Allowance was increased to £10,500 (from £5,000), providing relief for smaller employers.
Corporation Tax
Corporation tax rates remain unchanged for 2025/26:
- Small Profits Rate (19%) — Profits up to £50,000
- Main Rate (25%) — Profits over £250,000
- Marginal Relief — Available for profits between £50,000 and £250,000
Dividend Allowance
The Dividend Allowance remains at £500 for 2025/26. Any dividends above this are taxed at 8.75% (basic rate), 33.75% (higher rate), or 39.35% (additional rate).
Capital Gains Tax (CGT)
Following changes in the Autumn Budget 2024, CGT rates for most assets are now:
- Basic rate taxpayers: 18% (previously 10%)
- Higher/additional rate taxpayers: 24% (previously 20%)
The Annual Exempt Amount remains at £3,000.
ISA Allowances
The annual ISA subscription limit remains at £20,000. Maximising your ISA remains one of the most tax-efficient ways to grow savings and investments.
Pension Contributions
The annual pension allowance is £60,000 (or 100% of earnings, whichever is lower). Pension contributions remain one of the most powerful tax planning tools available, providing upfront tax relief and long-term tax-free growth.
Key Dates 2025/26
- 6 April 2025 — Start of the 2025/26 tax year
- 31 January 2026 — Self Assessment tax return and payment deadline
- 5 April 2026 — End of the 2025/26 tax year; use it or lose it for allowances
- 6 April 2026 — MTD for ITSA launches for businesses with income over £50,000
Planning Tips
- Review salary/dividend split if you run a limited company — the optimal split has shifted with NIC changes
- Maximise pension contributions to reduce taxable income
- Use your £20,000 ISA allowance before 5 April 2026
- Review your CGT position and consider realising gains within the £3,000 annual exempt amount
- Prepare for Making Tax Digital for ITSA if your income exceeds £50,000
Conclusion
Tax rules are complex and subject to change. This guide provides a general overview for the 2025/26 tax year. We strongly recommend speaking with a qualified accountant for advice tailored to your specific circumstances. Contact Ascot Accountancy for a free initial consultation.