New Tax Year 2026-27: Every Change That Affects Your Pay, Savings and Pension

Personal Allowance and Income Tax Thresholds

The personal allowance remains frozen at £12,570 for 2026-27 - unchanged since April 2021. The basic rate band ceiling stays at £37,700 of taxable income (meaning income up to £50,270 gross before the higher rate kicks in). The additional rate threshold remains at £112,570 of taxable income.

The freeze means that as wages rise with inflation, more taxpayers are pulled into higher bands - a process HMRC's own figures acknowledge is adding millions to the tax rolls each year without any formal rate rise. The Office for Budget Responsibility estimated in March 2026 that the freeze will raise an additional £28bn annually by 2027-28 compared with if thresholds had been uprated.

Dividend Tax Rates From 6 April 2026

Dividend allowance remains at £500 - the same reduced figure introduced in 2024. Above that allowance, dividend tax rates applying from 6 April 2026 are:

Company directors and shareholders drawing dividends should recalculate their optimal salary/dividend split for 2026-27, particularly given the higher-rate dividend charge now applying at a lower dividend income threshold than in previous years.

Property Income Rates

From 6 April 2026, rental and other property income is taxed at new rates for higher and additional rate taxpayers. The new property income rates are:

These rates apply to property income received from 6 April 2026 onwards, including rental income from residential and commercial property. Landlords should review their accounting periods carefully if income straddles the April 2026 date.

VCT Relief Cut From 30% to 20%

One of the more significant changes for higher-rate investors is the reduction in Venture Capital Trust (VCT) income tax relief. From 6 April 2026, the relief rate drops from 30% to 20% on subscriptions up to £200,000 per tax year. The 5-year holding period rule and CGT exemption on disposal are unchanged.

Investors who subscribed to VCTs before 6 April 2026 retain the 30% relief against 2025-26 tax. New subscriptions from 6 April 2026 attract only 20% relief. The change was confirmed in the Autumn Budget 2025 and applies without transitional relief to any subscription made in the new tax year.

National Insurance and Employer Costs

Employer National Insurance Contributions increased from 13.8% to 15% from 6 April 2025 and remain at 15% for 2026-27. The secondary threshold (the point at which employers start paying NICs per employee) fell to £5,000 per year. For businesses employing multiple part-time workers, this represents a meaningful cost increase.

The Employment Allowance, which offsets employer NICs, rose to £10,500 for eligible businesses - up from £5,000. Most small employers with a total NIC bill under £100,000 in 2024-25 should qualify. The allowance cannot be claimed against Class 1A or Class 1B NIC liabilities.

ISA Allowances and Savings

The adult ISA annual subscription limit remains at £20,000 for 2026-27. Lifetime ISA (LISA) limit stays at £4,000 per year (counting toward the £20,000 total), with the government bonus of 25% (maximum £1,000 per year) unchanged. Junior ISA allowance remains at £9,000.

The personal savings allowance is unchanged: £1,000 for basic rate taxpayers, £500 for higher rate taxpayers, and nil for additional rate taxpayers. With savings rates remaining elevated compared to the 2010-2020 decade, additional rate taxpayers with significant cash savings may face tax bills on interest income for the first time.

Pension Annual Allowance

The pension annual allowance remains at £60,000 for 2026-27, following the restoration from £40,000 in April 2023. The money purchase annual allowance (MPAA) - applying once you have flexibly accessed pension income - remains at £10,000.

The Lump Sum and Death Benefit Allowance (LSDBA) of £1,073,100 continues. The Lump Sum Allowance (LSA) for tax-free cash remains at £268,275 - equivalent to 25% of the old lifetime allowance figure. Individuals who had earlier protections (Enhanced, Primary, Fixed) should verify their protected allowances have not been inadvertently lost by pension contribution or employer enrolment changes.

Important: This article is for informational purposes only and does not constitute financial, tax, or legal advice. Always verify figures with official sources before making any financial decision.

Frequently Asked Questions

Has the personal allowance changed for 2026-27?

No. The personal allowance remains frozen at £12,570. It has been frozen since April 2021 and will remain at this level until at least April 2028 under current government plans.

When do the new dividend rates take effect?

The new dividend rates of 10.75%, 35.75% and 39.35% apply to dividends received from 6 April 2026 onwards. Dividends received before 6 April 2026 fall under 2025-26 rates.

What is the VCT relief rate for 2026-27?

VCT income tax relief is 20% for 2026-27 on subscriptions up to £200,000. This is reduced from 30% which applied in previous years.

Has the ISA allowance increased for 2026-27?

No. The adult ISA allowance remains at £20,000 for 2026-27. The Junior ISA limit is £9,000.

Sources: HMRC - Income Tax rates and allowances (gov.uk); HMRC - Dividend Tax rates (gov.uk); HMRC - Individual Savings Accounts (gov.uk); HMRC - VCT relief (gov.uk); Office for Budget Responsibility - Economic and Fiscal Outlook March 2026 (obr.uk); legislation.gov.uk - Income Tax (Trading and Other Income) Act 2005.