UK Personal Tax Changes from 2025/26 Onwards — What You Need to Know

Personal tax can be complicated and recent changes announced in the UK Autumn Budget 2025 will make it even more important to understand what you pay, when, and why. Whether you’re self-employed, a director, landlord, or investor, these changes affect how your income will be taxed from the 2025/26 tax year and beyond and how you report it through a Self Assessment tax return.

This guide explains the main changes to personal taxes, including income tax thresholds, dividend and savings income, property income tax, and other key rules, all in plain English so you can plan effectively.

Freezing of Personal Allowances & Thresholds

One of the most significant changes from the Autumn Budget 2025 is the extension of the freeze on personal tax thresholds including the personal allowance, basic rate limit, and higher rate threshold until 5 April 2031. That means:

• The personal allowance will remain at £12,570

• The basic rate threshold will stay at £50,270

• The additional rate threshold will remain at £125,140

Because these thresholds are frozen while incomes rise with inflation, more people will find themselves paying higher rates of tax over time, a phenomenon known as fiscal drag.

Income Tax Rates — What’s Staying the Same

The headline rates of income tax remain unchanged for the tax year 2025/26:

• 20% on income within the basic rate band

• 40% on income within the higher rate band

• 45% on income in the additional rate band

However, because thresholds are frozen, taxpayers can be pulled into higher bands sooner than before, especially once income rises with inflation.

Dividend Income Tax — Higher Rates from April 2026

Dividend income, the earnings many company directors and investors receive from company profits, will become more expensive to tax from April 2026:

• The basic dividend tax rate increases from 8.75% to 10.75%

• The higher dividend tax rate increases from 33.75% to 35.75%

• The additional rate remains 39.35%

The dividend allowance, the amount you can earn in dividends tax-free, stays at £500 for 2026/27.

Savings Income Tax — Higher Rates from April 2027

Savings interest that isn’t sheltered in tax-efficient wrappers (like ISAs) will be taxed at higher rates from April 2027, with further reporting changes expected under Making Tax Digital for Income Tax. The increases apply across all bands:

• Basic rate rises from 20% to 22%

• Higher rate rises from 40% to 42%

• Additional rate rises from 45% to 47%

The personal savings allowance (up to £1,000 tax-free for basic rate taxpayers and £500 for higher rate taxpayers) continues to apply, as does the starting rate for savings up to £5,000 for those with low non-savings income.

Individuals with low non-savings income may benefit from the starting rate for savings, which allows up to £5,000 of savings interest to be taxed at 0%. This applies where non-savings income (such as wages or pensions) is below the personal allowance, and the £5,000 band is reduced as non-savings income increases.

Property (Rental) Income Tax — Separate Rates from April 2027

Currently, rental profits form part of your general income and are taxed at your marginal tax rate (20%, 40%, or 45%). The Budget confirmed a move to separate tax rates for property income from 6 April 2027:

• Property basic rate: 22%

• Property higher rate: 42%

• Property additional rate: 47%

This change means that rental income will no longer automatically benefit from the same bands and allowances as earned income, increasing the tax burden for many landlords and making it more important to understand the tax rules for landlords.

Capital Gains Tax and Other Allowances

The Budget did not change headline Capital Gains Tax (CGT) rates or allowances for 2025/26, they remain:

• 18% for most assets for basic rate taxpayers

• 24% for higher and additional rate taxpayers

• £3,000 annual CGT allowance

However, because the personal allowance and thresholds are frozen, more taxpayers may find themselves in higher CGT bands when they sell assets.

The Annual Cash ISA limit will be reduced from £20,000 to £12,000 from April 2027, while the overall ISA subscription limit remains unchanged.

Cash ISAs play an important role in personal tax planning. Any interest earned within a Cash ISA is completely tax-free and does not count towards your personal savings allowance, Capital Gains Tax, or Self Assessment reporting. Although ISAs do not provide relief for Capital Gains Tax on assets held outside the ISA wrapper, any interest or investment growth inside an ISA is fully sheltered from tax.

National Insurance, Pension Contributions and Thresholds

Although the personal allowance stays at £12,570, the Budget also confirmed changes to other personal tax elements:

• National Insurance reliefs on pension salary sacrifice contributions above £2,000 per year will be removed from April 2029 (so NICs apply on larger pension savings). These changes will affect take-home pay and planning for retirement for many workers over the coming years.

• The annual pension allowance remains at £60,000 for the 2025/26 tax year, allowing individuals to contribute up to this amount each year while benefiting from tax relief, subject to earnings. Personal pension contributions continue to receive tax relief at your marginal income tax rate, meaning higher and additional rate taxpayers can reclaim further relief through Self Assessment.

• For high earners, the tapered annual allowance still applies, reducing the £60,000 allowance once adjusted income exceeds £260,000. However, the lifetime allowance charge has been abolished, removing previous tax penalties on larger pension pots, although reporting requirements remain.

Why These Changes Matter (and What You Can Do)

In practice, this means:

• Many taxpayers will pay more tax in real terms even if their income doesn’t rise

• More individuals may be pulled into higher tax bands because thresholds are frozen

• Dividend, savings, and property income will become more expensive to hold and report

These are broad-based tax increases, not targeted reliefs, and they will affect a wide range of UK taxpayers. If you want a deeper understanding of how all personal taxes fit together, our complete guide to personal taxes explains the full picture in plain English.

For business owners, landlords, and high earners, understanding these changes early allows better planning, whether that’s adjusting how income is extracted, using tax-efficient wrappers like ISAs, or considering changes in business structure.

How We Can Help You Navigate These UK Personal Tax Changes

Keeping up with personal tax changes can be challenging, especially when rates, thresholds, and reporting rules continue to evolve. We help individuals, business owners, and landlords across the UK understand how these changes apply to their specific circumstances and what practical steps they should take as a result. Our approach goes beyond simply submitting figures to HMRC. We take the time to review all income sources, ensure the correct tax treatment is applied, and identify opportunities to reduce tax legally through effective planning.

We prepare and file Self Assessment tax returns accurately and on time, explain payments on account so there are no surprises, and provide clear guidance on areas such as dividend planning, rental income, pension contributions, and capital gains reporting. Where income structures become more complex, such as for company directors or contractors, we help ensure everything is set up in the most tax-efficient way while remaining fully compliant with HMRC rules. Most importantly, we explain everything in plain English, giving you confidence that your tax position is correct and that you are not paying more tax than you need to.

Final Thoughts

The UK personal tax landscape is shifting and for most taxpayers, it means paying more tax sooner. The combination of frozen thresholds and rising tax rates on savings, dividends, and property income increases the importance of good planning.

If you want to be confident your tax affairs are compliant, efficient, and aligned with your personal and business goals, get in touch with us today. Our team will help you stay ahead of the changes and make tax work for you.