UK Tax Rates 2026/27: Complete Guide for Individuals and Businesses

UK tax rates change regularly, so understanding them is essential for individuals, investors, and businesses planning their finances for the 2026/27 tax year.

Whether you are an employee, self-employed, landlord, or company director, knowing your potential tax obligations helps you manage your bill and benefit from tax-free allowances and relief.

This guide explains the key tax rates, tax thresholds, and allowances affecting both personal tax and corporate tax in England, Wales and Northern Ireland (note that Scotland has different income tax bands).

Personal tax

Personal taxation refers to the taxes individuals pay on their earnings, investments, and assets. The amount you pay depends on your taxable income, tax band, and the tax-free personal allowance available to you.

Income tax

Income tax is the tax paid on earnings such as wages, self-employment profits, pensions, and some benefits.

In the 2026/27 tax year, most people pay tax through PAYE, while others report income via a self-assessment tax return. Knowing the UK income tax rates helps determine how much income tax will apply to your earnings.

Your taxable income may include salary or wages, self-employment income, pension income, rental income, and some savings income. Once your personal allowance is deducted, the remaining taxable income is taxed using the relevant income tax rates.

Tax-free personal allowance

For the 2026/27 tax year, the UK personal tax allowance remains at £12,570. This means most individuals can earn up to this amount before they start paying income tax.

An individual’s tax code normally reflects their tax-free personal allowance, ensuring the correct amount of tax is deducted through PAYE. However, for individuals who have multiple income sources, such as self-employment income or rental income, etc., you may need to file a self-assessment tax return to ensure the right amount of tax is paid.

Key points about the personal allowance include:

• The tax-free personal allowance is £12,570; it then reduces gradually if your income exceeds £100,000.
• The allowance is applied before calculating how much income tax you owe.
• Some individuals can transfer part of their personal allowance to their spouse through the marriage allowance. The Marriage Allowance allows individuals to transfer £1,260 of their Personal Allowance to their spouse or civil partner if they earn less than the standard Personal Allowance.
• For individuals earning more than £100,000, the Personal Allowance decreases by £1 for every £2 earned above that threshold.
• Understanding your personal allowance and other tax-free allowances is important because they directly affect how much tax you pay.

For a full breakdown of all tax rates, allowances, and thresholds, download our detailed UK Tax Rates 2026/27 guide.

Income tax bands

The income tax bands for England, Wales and Northern Ireland in the 2026/27 tax year are:

Each tax band corresponds to an income range, known as a tax bracket. A specific tax rate is applied to income within each range. As your income increases, only the amount above each threshold moves into the next tax band at the higher rate. Understanding how income is allocated across tax bands and the thresholds for each helps you estimate how much income tax you may owe and plan strategies to reduce your tax bill, such as increasing pension contributions or claiming tax relief.

The Blind Person’s Allowance can increase your personal allowance if you are registered blind.

Dividend tax

If you receive dividend income from shares or your own limited company, you may need to pay dividend tax.

For the 2026/27 tax year, the dividend allowance is £500, meaning the first £500 of dividend income is tax-free.

After the allowance, the dividend tax rate depends on your income tax band. Dividend tax rates for the 2026/2027 financial year are 10.75% for the ordinary rate, 35.75% for the higher rate, and 39.35% for the additional rate.

Directors of limited companies often receive a combination of salary and dividend income to manage how much tax they pay. However, careful planning is required to ensure compliance with current tax rules.

Capital Gains Tax

Capital gains tax (CGT) applies when you sell or dispose of assets such as shares, property that is not your main residence, or valuable possessions.

You may need to pay capital gains tax if the profit exceeds the capital gains tax allowance, also known as the annual exempt amount.

For the 2026/27 tax year, the annual exempt amount is £3,000. This means gains below this threshold are covered by the capital gains tax allowance, and no capital gains tax is due.

Capital Gains Tax rates

The Capital Gains Tax rates depend on your income tax band and the type of asset sold.

Capital Gains Tax rates for property gains are 18% for basic-rate taxpayers and 24% for higher- and additional-rate taxpayers.

For most other assets, the capital gains tax rate is typically 10% for basic-rate taxpayers and 20% for higher and additional-rate taxpayers.

If your gains exceed the annual exempt amount, you must report them and pay Capital Gains Tax, usually through a self-assessment tax return. Strategic planning and available tax relief may help reduce the amount of tax payable.

Special Capital Gains Tax rates (2026/27)

• You may still reduce liability using tax reliefs (e.g. BADR, losses, transfers between spouses)
• Trustees typically pay CGT at 24%

Business Asset Disposal Relief (BADR)

Business Asset Disposal Relief (BADR) is a UK tax relief designed to reduce the amount of capital gains tax payable when individuals dispose of all or part of a business. It is commonly used by business owners, partner’s, and certain shareholders who are selling qualifying business assets or shares.

When the conditions are met, BADR allows gains to be taxed at a reduced rate of 10%, rather than the standard capital gains tax rates, up to a lifetime limit of £1 million.

To qualify, individuals typically need to have owned the business or shares for at least two years and meet specific criteria regarding their role and shareholding. This relief can significantly lower the overall tax liability on a business sale, making it an important consideration in exit planning and long-term tax strategy.

National Insurance Contributions

In addition to paying income tax, employees and self-employed individuals may need to pay National Insurance Contributions.

NICs help fund benefits such as the State Pension and certain state benefits. Employees begin paying national insurance contributions once earnings exceed the relevant thresholds.

For employees, NICs generally apply once earnings exceed the lower earnings limit, and higher thresholds apply until the upper earnings limit is reached. Employers also pay NICs on employee earnings above the secondary threshold.

Self-employed individuals may pay Class 2 and Class 4 National Insurance Contributions, depending on their profit levels. Understanding both income tax rates and National Insurance Contributions is essential for calculating your overall tax bill.

Pension contributions

Pension contributions can receive tax relief, with basic-rate taxpayers getting 20% relief and higher-rate taxpayers receiving 40% relief.

Stamp Duty Land Tax

Stamp Duty Land Tax (SDLT) applies when purchasing property or land in England, Wales, and Northern Ireland.

The amount payable depends on the value of the property and the applicable tax band. Different tax rates apply as property values increase, meaning buyers may fall into multiple tax bands when calculating the total tax due.

Residential property SDLT rates (standard buyers)

First-time buyer SDLT rates

First-time buyers may qualify for SDLT relief:

Additional property surcharge

If you purchase an additional residential property (such as a buy-to-let or second home), an extra 5% surcharge is added to each SDLT tax band.

Inheritance Tax (IHT)

Inheritance tax applies to estates passed on after death.

For the 2026/27 tax year, the IHT threshold (the nil-rate band) remains at £325,000. The standard inheritance tax rate is 40% on the value of the estate above this threshold.

The inheritance tax threshold can be increased by an additional £175,000 if a family home is passed on to children or grandchildren.

Unused portions of a deceased spouse’s or civil partner’s nil-rate band can be claimed by the survivor, potentially increasing their inheritance tax threshold.

There are various reliefs that may reduce inheritance tax, including the residence nil-rate band when property is passed to direct descendants, as well as business and agricultural reliefs. Inheritance tax planning is essential for minimising potential tax liabilities on estates.

Corporate tax

Businesses operating as limited companies must consider several key taxes, including corporation tax, VAT, and other property-related taxes.

Corporation tax

Corporation tax is charged on a company’s profits, including trading income, investments, and gains from the sale of business assets.

For the 2026/27 tax year, the main corporation tax rate for companies with profits above £250,000 is 25%. A lower tax rate of 19% applies to companies with profits below £50,000, with marginal relief available between these thresholds.

Businesses can reduce their tax bill by claiming allowable expenses and tax relief on costs such as staff wages, equipment purchases, business travel, and pension contributions.

VAT

VAT (Value Added Tax) is a consumption tax applied to most goods and services in the UK.

The standard VAT tax rate in the UK is 20%, although reduced rates may apply in certain circumstances.

Businesses must register for VAT if their taxable turnover exceeds the registration threshold. Once registered, they must charge VAT on eligible goods and services, submit VAT returns, and pay tax collected to HMRC.

VAT can be complex, so seek professional advice.

Managing your tax position

Understanding UK tax rates for the 2026/27 tax year helps individuals and businesses plan effectively and reduce unnecessary liabilities.

At dns, our tax experts can help you to minimise both your corporate and personal tax bills by working with you on tax planning strategies. These strategies include:

• Claiming appropriate tax reliefs.
• Using available tax-free allowances.
• Managing dividend vs salary income.
• Making pension contributions.
• Applying the marriage allowance.
• Ensuring your self-assessment tax return is accurate.

If you are unsure how much income tax you need to pay or want to reduce your tax bill, professional advice from dns accountants can help ensure you follow the correct tax rules, maximise available tax-free allowances, and stay compliant with HMRC requirements. We can help individuals and businesses understand how much tax they owe and plan effectively for the 2026/27 tax year. Call: 03300 88 66 86 or Email: [email protected] today to reduce your tax liabilities.

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.