Last reviewed: May 2026 | Source: HMRC rates and thresholds for employers 2026/27, Finance Act 2024
Key finding: HMRC income tax changes for the 2026/27 tax year continue the Finance Act 2022 freeze on the personal allowance (£12,570) and higher rate threshold (£50,270), with the dividend allowance held at £500 and the CGT framework operating under the rates set by Finance Act 2024.- Personal allowance £12,570 continues for 2026/27 under the freeze (Finance Act 2022)
- Higher rate threshold £50,270 continues for 2026/27 under the freeze (Finance Act 2022)
- £500 dividend allowance held at the April 2024 level (Finance Act 2023)
HMRC income tax changes April 2026 are dominated by what has not changed: the personal allowance, the higher rate threshold, and the additional rate threshold all continue at their frozen 2021/22 levels under Finance Act 2022. The dividend allowance remains at £500, the personal savings allowance at £1,000 (basic rate) and £500 (higher rate), and the CGT framework continues on the rates set by Finance Act 2024. The most operationally significant change for the 2026/27 tax year sits in the bedding-in of the pension lifetime allowance abolition and the framework of lump sum and lump sum and death benefit allowances introduced from April 2024.
- £12,570 personal allowance held for 2026/27 (Finance Act 2022)
- £50,270 higher rate threshold held for 2026/27 (Finance Act 2022)
- £500 dividend allowance held for 2026/27 (Finance Act 2023)
- £1,073,100 pension lump sum allowance (Finance Act 2024)
- £268,275 pension lump sum and death benefit allowance (Finance Act 2024)
The personal allowance freeze continues into the 2026/27 tax year
The personal allowance remains £12,570 for the 2026/27 tax year under the Finance Act 2022 freeze, which runs through to the end of the 2027/28 tax year. The freeze was originally legislated in Finance Act 2021 for the 2022/23 to 2025/26 period and extended by Finance Act 2022 to cover 2026/27 and 2027/28. The 2026/27 continuation is not a new policy: it is the legislated default. HMRC published the position through its rates and thresholds for employers release at the start of the 2026/27 tax year. The £100,000 taper threshold and the £125,140 zero-allowance point are unchanged.
The cumulative effect of the freeze is captured in the OBR Economic and Fiscal Outlook. As nominal wages rise against the frozen allowance, an increasing share of the working-age population pays income tax on a larger share of their income, with the effect concentrated at the lower end of the distribution where small movements have proportionally larger impacts on net income.
The higher rate threshold remains at £50,270 for 2026/27
The higher rate threshold continues at £50,270 of taxable income for the 2026/27 tax year, the same nominal level since April 2021 under Finance Act 2022. The freeze covers the 40% threshold alongside the personal allowance, and continues to drive the fiscal drag mechanism identified by the OBR as the single largest source of additional income tax receipts in the current parliament. The additional rate threshold of £125,140 (introduced by Finance Act 2022 from April 2023, replacing the previous £150,000) also continues unchanged.
The Scottish income tax rates and thresholds for 2026/27 are set separately by the Scottish Parliament under the Scotland Act 2016 framework. Scottish residents face the divergent six-band structure regardless of the UK-wide threshold position, with the Scottish Government Budget setting the Scottish bands each year.
The dividend allowance remains at £500 for 2026/27
The dividend allowance continues at £500 for the 2026/27 tax year, having been cut from £1,000 to £500 from April 2024 under Finance Act 2023, with no further reduction or restoration legislated. Dividend income above £500 is taxed at 8.75% (basic rate), 33.75% (higher rate), and 39.35% (additional rate) per HMRC dividend income guidance. The £500 floor is a meaningful cut from the £5,000 figure that applied in 2016/17, the £2,000 figure that applied through to April 2023, and the £1,000 figure that applied for 2023/24. ISA-held shares remain exempt from dividend tax.
The OBR has projected continued growth in the number of taxpayers with dividend tax liabilities through the forecast horizon, as the reduced allowance interacts with rising dividend incomes from private companies and listed portfolios.
The personal savings allowance remains at £1,000 (basic) and £500 (higher rate)
The personal savings allowance is unchanged for 2026/27 at £1,000 for basic-rate taxpayers, £500 for higher-rate taxpayers, and zero for additional-rate taxpayers, the same levels set by Finance Act 2016. The allowance was introduced as part of the simplification of the savings income tax framework, replacing the previous system of basic-rate tax withheld at source. The combination of the unchanged allowance and the materially higher Bank of England base rate over the recent monetary tightening cycle has pulled significantly more savers into the savings tax net than was the case when the allowance was set in 2016.
HMRC reconciles savings income through PAYE adjustments where amounts are reportable, or through self-assessment where the saver is already within the regime. Banks and building societies continue to report interest paid to HMRC under the standard CRS and AEOI reporting framework.
The pension lump sum allowance framework continues through 2026/27
The pension lump sum allowance framework introduced by Finance Act 2024 continues to operate through the 2026/27 tax year, with the £1,073,100 lump sum allowance and £268,275 tax-free lump sum entitlement applying to pension benefits taken on or after 6 April 2024. The lifetime allowance was abolished from 6 April 2024 and replaced by the new framework, ending the lifetime allowance charge that had applied since 2006. The £268,275 figure is the standard maximum tax-free cash that can be taken across all pension pots; the £1,073,100 lump sum and death benefit allowance covers the broader category of authorised lump sum payments and lump sum death benefits.
Members who held lifetime allowance protections (fixed protection, individual protection, enhanced protection) retain the higher protected allowance figures under transitional arrangements set out in Finance Act 2024 Schedule 9. HMRC has published technical guidance under its PTM (Pensions Tax Manual) series covering the operation of the new framework and the transitional protections.
The merged R&D scheme continues into the 2026/27 tax year
The merged R&D scheme introduced by Finance Act 2023 continues for accounting periods beginning on or after 1 April 2024, providing a 20% above-the-line credit on qualifying R&D expenditure with an enhanced rate for loss-making R&D-intensive SMEs. The 2026/27 tax year falls fully within the merged scheme operational window. The pre-merger SME scheme (with a 230% deduction and 10% repayable credit for loss-makers) is no longer available for accounting periods starting after 1 April 2024, except under the R&D intensive cohort rules which provide enhanced support for loss-making SMEs with high R&D intensity.
HMRC has materially increased compliance activity in this area following NAO and Public Accounts Committee evidence on fraud and error in the pre-merger schemes. Claims for 2026/27 accounting periods are subject to the additional information form requirements and senior officer declaration introduced by Finance Act 2024.
Class 4 National Insurance Contributions continue at the post-April 2024 rate
Self-employed Class 4 National Insurance Contributions continue at 6% on profits between the lower profits limit (£12,570) and the upper profits limit (£50,270) for 2026/27, with 2% above the upper limit, following the rate reduction from 9% legislated in Spring Budget 2024. The reduction was part of the package of NIC changes legislated in 2024 alongside the cut to Class 1 employee NIC. Class 2 NICs continue to be voluntary for most self-employed individuals from April 2024, with payment available to secure NI credits where profits are below the small profits threshold.
HMRC self-assessment guidance for 2026/27 reflects the reduced Class 4 rate. Employer Class 1 secondary NIC remains at 13.8% above the secondary threshold, unchanged in the 2024 reform package.
| Item | 2023/24 | 2026/27 |
|---|---|---|
| Personal allowance | £12,570 | £12,570 |
| Higher rate threshold | £50,270 | £50,270 |
| Additional rate threshold | £125,140 | £125,140 |
| Dividend allowance | £1,000 | £500 |
| PSA basic rate | £1,000 | £1,000 |
| Lifetime allowance | £1,073,100 | Abolished (replaced) |
What are the HMRC income tax changes April 2026?
The 2026/27 tax year continues the Finance Act 2022 freeze on the personal allowance (£12,570), the higher rate threshold (£50,270), and the additional rate threshold (£125,140). The dividend allowance remains at £500 and the personal savings allowance is unchanged.
Are there hmrc tax rule changes april 2026 to the pension framework?
The Finance Act 2024 abolition of the lifetime allowance and replacement with the lump sum allowance (£1,073,100) and lump sum and death benefit allowance framework continues to operate. The £268,275 standard tax-free lump sum entitlement also continues, with protections retained for those who held LTA protections under transitional arrangements.
What new tax year 2025 changes carried into 2026/27?
The April 2024 Finance Act 2024 package legislated the threshold and rate framework that continues into 2026/27, including the merged R&D scheme, the cut to Class 4 NICs, and the new pension allowance framework. No additional new measures take effect in April 2026 outside the legislated continuation of these reforms.
Did the tax changes 2026 alter the CGT framework?
CGT continues to operate at the rates set by Finance Act 2024: 18% (basic rate) and 24% (higher rate) on most asset disposals from April 2024, with residential property remaining at 24% across both bands. The annual exempt amount continues at £3,000. Business Asset Disposal Relief continues at 14% from April 2025 under the further reform legislated in Finance Act 2024.
Has the personal savings allowance changed for 2026/27?
No. The personal savings allowance remains at £1,000 (basic rate), £500 (higher rate), and zero (additional rate) per the levels set by Finance Act 2016. The £5,000 starting rate for savings continues for taxpayers with limited non-savings income.
Where can I check the latest HMRC rates and thresholds?
HMRC publishes the annual rates and thresholds for employers and benefit claimants release at the start of each tax year. The publication covers PAYE codes, NIC rates and thresholds, statutory pay rates, and the income tax bands. The reference is the authoritative source for the 2026/27 operational figures.
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How we verified this
This article draws on the following primary UK sources:
- HMRC: rates and thresholds for employers 2026/27
- HMRC: What changed in the 2026/27 tax year
- Finance Act 2022 (legislation.gov.uk) for the threshold freeze
- Finance Act 2023 (legislation.gov.uk) for the dividend allowance reduction and merged R&D scheme
- Finance Act 2024 (legislation.gov.uk) for the LTA abolition, CGT framework, and Class 4 NIC reform
- OBR Economic and Fiscal Outlook and Spring Statement 2026 forecasts
- HMRC PTM (Pensions Tax Manual) for the lump sum allowance framework
No secondary aggregators, no press releases from commercial providers, and no statistics without a named government or regulatory source were used.
