Tax rates & Facts

Tax Facts 2025-26

Welcome to the 2025-26 Spring Statements Tax Facts

These pages are prepared for guidance only. We recommend that you contact us for advice before acting on any information contained in these pages and we cannot accept responsibility for any action taken without such advice.

Personal Tax

Main personal allowances

Notes

1. PA is reduced by £1 for every £2 by which Adjusted Net Income (ANI) exceeds £100,000, so PA is nil when ANI is £125,140.
2. ANI is total taxable income, less qualifying pension contributions and Gift Aid donations.
3. Marriage allowance is the transferable part of the PA and is available only to married couples and civil partners born after 5 April 1935. It can be transferred to their spouse or civil partner as long as the recipient is not a higher or additional rate taxpayer.
4. The rent-a-room exemption is available where the taxpayer lets out part of the home they live in as furnished residential accommodation.
5. The trading and property income allowances have various conditions that restrict their availability.
6. Where rent-a-room, trading or property income exceed the relevant limit above, that limit (rather than expenses) may be deducted from gross income.

Income tax bands

Notes

1. The BRB (Scotland: intermediate rate band) and additional rate threshold are extended by the grossed-up equivalent of personal pension contributions and Gift Aid donations paid by the taxpayer in the tax year, or treated as paid in the tax year.
2. Taxable income usually uses up the rate bands in the following order:
• G 'General income' (employment, pensions, business profits, rent)
• S 'Savings income' (mainly interest)
• D 'Dividends' (distributions from companies/most unit trusts)
3. The savings rate band is part of the basic rate band, meaning that to the extent that savings income falls in the first £5,000 of the basic rate band, it is taxed at nil rather than 20%.
4. Different bands and rates apply to general income in Scotland.

Income tax rates

Notes

1. The PSA taxes interest at nil, where it would otherwise be taxable at 20% or 40%. It is not available to an additional rate taxpayer.
2. Dividends are usually taxed as the ‘top slice’ of income. The Dividend Allowance taxes the first £500 (2024/25: £1,000) of dividend income at nil rather than the rate that would otherwise apply.

Income tax bands and rates - Scotland

Note

The Scottish rates and bands do not apply for savings and dividend income, which are taxed at normal UK rates.

New UK residents

From 2025/26, those who are in their first 4 years of UK residence, having been non-resident for the previous 10 years, can claim to have most types of foreign income exempt from UK tax for the year. A similar claim is available for foreign capital gains.

Notes

1. In prior years, ‘remittance basis’ was available for UK residents who were neither domiciled nor deemed domiciled in the UK. If claimed, foreign income or gains were only taxable in the UK if remitted here.
2. Remittance basis users with unremitted income or gains can use the Temporary Repatriation Facility in 2025/26 and the next two years. This allows them to be taxed at a favourable rate (12% or, in 2027/28, 15%) on designated income or gains. Otherwise, their unremitted income and gains become taxable at normal rates when remitted to the UK.

Residential landlords

Notes

1. Finance costs comprise mainly interest, but include related matters such as arrangement fees.
2. A tax reducer at 20% of the disallowed finance costs is available to reduce the landlord’s income tax liability, but is subject to certain restrictions.
3. These rules do not affect qualifying furnished holiday lets, commercial property or corporate landlords.

High Income Child Benefit charge (HICBC)

Notes

1. Only applicable to families who receive child benefit, where adjusted net income of the higher earner is above the lower threshold.
2. HICBC is equivalent to 1% of child benefit received by the family, for every £200 of adjusted net income over the lower threshold.
3. The higher earner in the family must declare child benefit received by them or their partner on their tax return.
4. The recipient of child benefit can elect not to receive it in order to avoid the HICBC, without losing their right to accrue certain state benefits. Child benefit payments can subsequently be recommenced if the claimant chooses.

Pensions

Registered pensions

Notes

1. Tax relief is generally obtained on pension contributions in one of three ways:
1. Under “net pay arrangements” i.e. contributions come out of gross pay;
2. By “relief at source” (RAS) i.e. contributions are made net of basic rate tax (which the fund claims back from HMRC);
3. Salary sacrifice (see note 12).
2. Tax relief at the taxpayer’s marginal income tax rate is given on the individual’s pension contributions up to 100% of earnings, capped by the AA.
3. Those with little or no UK relevant earnings can make pension contributions up to £3,600 gross (£2,880 net) per year.
4. AA can be increased by unused allowance brought forward from the previous three tax years.
5. AA is usually tapered down by £1 for every £2 of adjusted income over £260,000, to a minimum of £10,000.
6. Annual allowance charge (for pension inputs exceeding the annual allowance) is levied at the individual’s highest marginal tax rate.
7. Employers can contribute to the employee’s pension fund up to the AA per year, less any contributions made by the individual. Employer will enjoy tax relief on those contributions under the normal rules for business expenses.
8. Investors in personal and other defined contribution pension schemes can currently access all of their pension savings once they reach age 55. This will increase to age 57 on 6 April 2028.
9. When the investor takes benefits from such pension schemes under flexiaccess drawdown, up to 25% of the accumulated fund can be drawn as a tax-free lump sum. The balance is taxed at the investor’s marginal rate of tax that applies in the year those benefits are drawn.
10. The maximum tax-free pension commencement lump sum is £268,275, unless a higher amount is “protected”.
11. MPAA replaces AA where taxpayer has started to take taxable income from a defined contribution scheme (other than via an annuity) and has further pension inputs. There is no carry forward of unused MPAA.
12. Salary sacrifice for pension contributions is very tax-efficient. An employee agrees to give up some of their salary in exchange for pension contributions by the employer, which are exempt from income tax and National Insurance.
13. The amount that must be paid to the employee for National Minimum Wage (NMW) or National Living Wage (NLW) purposes will be the post-salary sacrifice amount, so a salary sacrifice can’t generally take an employee below the NMW/NLW.
14. The post-salary sacrifice amount will apply for all tax, National Insurance Contributions (NICs) and benefits purposes, including tax credits, pension net relevant earnings and statutory redundancy.
15. ‘Auto enrolment’ (AE) makes it a legal requirement for all employers to automatically enrol their eligible employees into a workplace pension and make contributions to that pension.
16. Under AE, the total minimum contribution is 8% of salary, of which the employer must fund a minimum of 3% of salary.
17. Employees can opt out of AE but those that do will need to be re-enrolled every three years.
18. Self-invested Personal Pensions (SIPPs) are a form of personal pension fund that can invest in a wider range of assets than other pension funds, where the investment is restricted to insurance-backed funds.
19. In particular, the permitted investments include direct holdings of quoted investments and commercial property. The latter is often owned by SIPPs of business owners, with the property being rented to the business as premises from which to operate. The rental payments are tax-deductible for the business and tax-exempt receipts for the SIPP.
20. Unlike other pension schemes, SIPPs are allowed to take on debt. They can (broadly) borrow up to 50% of their net asset value to invest in permitted investments.

State pension

Notes

1. An individual is eligible to draw the state retirement pension when he or she reaches State Pension Age (SPA). This age is increasing for both men and women. It became 66 in October 2020 and increases to 67 by 6 April 2028. It is due to reach 68 by 6 April 2046.
2. Individuals who reach SPA after 5 April 2016 receive the new state pension, which replaced the old state pension and the second state pension.
3. An individual who qualifies for the state pension may choose to defer claiming it. Any deferred pension will be paid at a higher rate than the normal pension.
4. The state pension is taxable.

Investment reliefs

Notes

1. ISA investors can invest in any combination of cash or shares, up to the overall limits shown. The £4,000 LISA limit is part of the general ISA limit of £20,000, not additional to it.
2. Taxpayers aged between 18 and 40 may open a LISA and invest up to £4,000 each year, which qualifies for a 25% Government bonus on amounts invested up to the age of 50.
3. This benefit is retained as long as the money is either
• put towards a first home costing up to £450,000, or
• kept in the account until reaching age 60, or
• withdrawn after being diagnosed with a terminal illness when having less than 12 months to live.
4. If the money in a LISA is withdrawn in other circumstances, the bonus is clawed back, with an additional 5% charge (i.e. total charge of 25% of amount withdrawn).
5. Junior ISAs are available to those aged under 18 and who don’t have a Child Trust Fund account. At age 18, their junior ISA becomes an adult ISA.
6. EIS and VCT investments attract 30% Income Tax relief. SEIS investments attract 50% Income Tax relief.
7. EIS and SEIS shares must be held for at least 3 years to keep the income tax relief. VCT shares must be held for a minimum of 5 years.
8. Where the disposal proceeds from any capital gain are reinvested under EIS in the four-year period that starts one year before the date of the gain, all or part of the original gain can be deferred.
9. Gains reinvested under SEIS, within the same tax year, up to the investment limit attract 50% exemption from CGT.
10. Investments made under EIS and SEIS can be carried back to be treated as made in the previous tax year, subject to the investment limits.
11. Gains on disposals of investments acquired under EIS and SEIS and held for at least 3 years are exempt from CGT if investment conditions have not been broken. Disposals of VCT shares are exempt CGT (i.e. no gain or loss arises).
12. Dividends from investments in VCTs do not attract income tax provided the original investment was made within the permitted maximum of £200,000 per year. Dividends received from EIS and SEIS schemes are taxable as normal.

National Insurance Contributions (NICs)

Class 1 NICs thresholds 2025/26

Notes

1. Employers and employees both contribute at rates dependent on the level of earnings during a weekly, monthly or annual earnings period.
2. No employee NICs are payable on earnings between the LEL and the PT but, when reported by the employer, the employee accesses entitlement to contributory benefits.

Class 1 NICs rates 2025/26

Notes

1. No employee NICs are payable once the employee reaches state retirement age, but employer NIC continue to be payable.
2. No employers' NICs are payable on earnings up to the UST for:
• employees aged under 21;
• apprentices aged under 25;
• armed services veterans in their first 12 months of civilian employment.
3. Employers with physical premises in a Freeport tax site or in an Investment Zone may be eligible for some relief from employers’ Class 1 NICs. See Freeport
4. A person with more than one employment can defer the payment of some employee NICs until after the end of the tax year. The total amount payable is then checked and limited, so the full 8% rate is only applied to income between the PT and the UEL.
5. An 'employment allowance' of £10,500 per qualifying business gives exemption from Class 1 employers’ NICs. Some businesses are excluded, including certain sole director companies. Employee NICs are unaffected.
6. Employers' NICs (at 15%) are also due on most taxable benefits (Class 1A) and on the amount chargeable to income tax under a PAYE settlement agreement (Class 1B).
7. When an employer reimburses non-deductible expenses to an employee, who has paid the initial cost themselves, the reimbursed amount is treated as earnings and is subject to PAYE and Class 1 NICs.

Class 2 NICs

Notes

1. Since 6 April 2024, self-employed people with profits above the SPT are no longer required to pay Class 2 NICs.
2. Those with profits above the SPT access entitlement to contributory benefits, while those whose profits are less than the SPT can pay Class 2 NICs voluntarily to maintain this access.

Class 3 NICs

Note

Anyone who wants to maintain State Pension rights may pay voluntary Class 3 NICs, but there are restrictions on paying Class 3 (or voluntarily paying Class 2) where the individual lives abroad.

Class 4 NICs

Notes

1. Class 4 NICs are payable on profits from UK trades or professions that exceed the lower profits limit.
2. Both Class 2 and Class 4 NICs are collected through self-assessment.
3. An individual who is both employed and self-employed may pay Class 1, Class 2 and Class 4 NICs, subject to the maximum limit for the year.

Employee Benefits

Employer-provided car benefit

Taxable benefit: List price multiplied by chargeable percentage

Then a further 1% for each 5g/km CO2 emissions, up to a maximum of 37%.

Notes

1. ‘List price’ is the list price when new, plus the cost of most accessories added, less any capital contribution (up to £5,000) by the employee.
2. The employer must pay Class 1A NICs at 15% on the benefit.
3. Diesel cars (with some exceptions) suffer a 4% supplement on the table's figures, but are still capped at 37%.

Car fuel benefit

Notes

1. Where fuel is provided by the employer for private use in a company car, the percentage used to calculate the car benefit is applied to the benefit multiplier in order to determine the taxable benefit.
2. The benefit is charged without reduction for contributions by the employee, unless all private fuel is paid for (in which case there is no benefit). This reimbursement by the employee must be done by 6 July following the end of the tax year, unless the fuel benefit is "payrolled", in which case the deadline is 1 June following the end of the tax year.
3. There is no taxable benefit where an employer provides free charging points for electric vehicles at their premises.
4. Where the employer provides the car and the employee provides the fuel, HMRC’s advisory fuel mileage rates can be used to reimburse the cost of fuel used on business journeys. This includes reimbursement of 7p/mile for electric cars. Those rates are updated each quarter and published at www.gov.uk/government/publications/advisory-fuel-rates.

Employer-provided van benefits

Note

If the private use of a van is restricted to home-to-work travel, there is no taxable benefit, unlike for company cars.

Employment-related loans

Notes

1. Where a director or employee receives one or more loans from an employer that in total exceed £10,000 at any point in the tax year, interest of at least the ORI must be paid to avoid a benefit charge. There must also be a contractual obligation to pay that interest.
2. Where a benefit arises, the excess of the ORI over the actual interest paid must be applied to the value of the loan to calculate the benefit.
3. Loans from a close company to shareholders of the company may also generate a tax charge for the company. A close company is (broadly) one under the control of 5 or fewer shareholders.
4. In a change of policy for 2025/26, the ORI may now be varied quarterly during the year. On the 6 April 2025, it is rising to 3.75%.

Tax-free mileage allowances

Notes

1. The above mileage rates also apply to employees completing business journeys in their own electric vehicle, as long as the employee is charging the vehicle themself.
2. Passenger must be completing the same business journey.
3. For all except the business passengers' allowance, if the employer does not pay the full mileage rate, the employee can claim tax relief on any shortfall from HMRC.

Employee share schemes

Notes

1. Generally, employees are charged to Income Tax on the value of shares that they are given or are issued to them by their employer, less any amount paid for the shares. NICs are also charged if the company is quoted, or the shares can be easily sold. If the employer operates one of the above tax-advantage schemes, the tax charges may be eliminated, reduced or deferred.
2. The employer must register the share scheme with HMRC, using the online Employment Related Securities (ERS) system, by 6 July following the end of the tax year in which the scheme is implemented.
3. Employers must file an annual return for each share scheme online through the ERS system by 6 July each year.
4. The above is a very brief summary of the main tax-advantaged share schemes; other conditions apply.

Tax-free Childcare (TFC)

Notes

1. Tax-free Childcare (TFC) accounts are available to all eligible parents. You cannot use TFC if you are receiving childcare vouchers, a scheme that is closed to new entrants.
2. Under TFC, where both parents work and earn a specified minimum income (but neither has income of more than £100,000 per year), they are able to put up to £8,000 a year per child into an account, which the Government will top up with 25p for every £1 contributed by the parents.
3. A TFC account can be used to pay for childcare for a child aged 11 and under, except for disabled children, where the limits are doubled and contributions can continue up to the age of 17.
4. Unlike the voucher scheme, TFC is available to the self-employed.
5. You cannot get TFC at the same time as claiming Universal Credit.
6. Parents may be eligible for up to 30 hours of government-funded childcare, for up to 38 weeks a year, subject to various qualifying conditions. The number of hours of free childcare per week that you can get depends on the age of your child. If your child is:
• 9 months to 2 years old, you can get 15 hours;
• 3 to 4 years old, you can get 30 hours.

Main exempt benefits

National Minimum Wage