What's changed, what's frozen and what's coming in UK personal tax. Maintained as HMRC and the Treasury publish updates.
The big story: frozen thresholds
The dominant theme in UK personal tax since 2021 has been frozen thresholds. The Personal Allowance (£12,570), higher-rate threshold (£50,270), additional-rate threshold (£125,140), ISA allowance (£20,000) and NIC primary threshold have all been held at the same levels for multiple years.
Current government policy extends these freezes to at least April 2028.
The economic effect is known as fiscal drag: as nominal wages rise with inflation but thresholds don't, more workers are pulled into higher tax bands each year without any change in real earnings. HMRC data shows approximately 6.1 million UK taxpayers will be in the higher-rate band by 2027/28, up from around 3 million in 2010.
What's frozen
| Threshold | Level | Frozen since | Until |
|---|---|---|---|
| Personal Allowance | £12,570 | April 2021 | At least April 2028 |
| Higher-rate threshold | £50,270 | April 2021 | At least April 2028 |
| Additional-rate threshold (England/Wales/NI) | £125,140 | April 2023 (after reduction) | At least April 2028 |
| NI Primary Threshold | £12,570 | April 2022 | At least April 2028 |
| ISA annual allowance | £20,000 | April 2017 | — |
| Junior ISA allowance | £9,000 | April 2020 | — |
| Lifetime ISA allowance | £4,000 | April 2017 | — |
| Personal Savings Allowance | £1,000 / £500 / £0 | April 2016 | — |
What changed going into 2026/27
National Living Wage rose to £12.71/hour
From April 2026, the NLW for workers aged 21+ increased from £11.44 to £12.71 per hour — an 11% rise. This affects millions of UK workers and pushes more low earners into the tax-paying zone (the NLW for a full-time 37.5hr/week worker now annualises to roughly £24,800).
State Pension age phased rise to 67
The State Pension age began its phased rise from 66 to 67 on 6 April 2026. Your exact pension date now depends on your date of birth to the day. Those born between 6 April 1960 and 5 April 1961 are affected.
Energy price cap adjustments
Ofgem's price cap adjusts quarterly. April 2026's cap reduced the typical household bill. July and October 2026 adjustments pending based on wholesale energy costs.
Dividend allowance stays at £500
After reductions from £2,000 (2017-2023) to £1,000 (2023/24) to £500 (2024/25), the dividend allowance has stabilised at £500.
Capital Gains Tax annual exempt amount at £3,000
Reduced from £12,300 (2022/23) to £6,000 (2023/24) to £3,000 (2024/25), now stable.
What's coming (announced but not yet in force)
Pensions and Inheritance Tax (April 2027)
Pension pots inherited on death are expected to come into Inheritance Tax scope from April 2027. This was announced in the October 2024 Autumn Budget. Major change affecting estate planning for anyone with substantial pension savings.
Cash ISA allowance reform (proposed)
Government has signalled a review of the Cash ISA allowance, with speculation about a possible reduction from £20,000 to as low as £12,000. Not confirmed in legislation. If implemented, would affect 2027/28 onwards.
Senior Managers Regime reforms
FCA and PRA announced streamlined SMR approvals in 2026. Not directly a tax change but affects anyone in FCA-regulated senior roles.
Making Tax Digital (MTD) rolling out
Self-employed with income above £50,000 are affected from April 2026; £30,000+ from April 2027; £20,000+ from April 2028. All in-scope taxpayers must keep digital records and file quarterly updates using MTD-compatible software.
Historical context: major UK tax changes since 2019
- April 2019: Personal Allowance rose to £12,500 (one year before freeze began)
- April 2020: NIC primary threshold rose from £8,632 to £9,500
- April 2021: Personal Allowance set at £12,570 — freeze began
- April 2022: Health & Social Care Levy introduced (1.25% on NIC) — repealed November 2022
- July 2022: NIC primary threshold aligned with Personal Allowance at £12,570
- April 2023: Additional-rate threshold cut from £150,000 to £125,140
- January 2024: NIC main rate cut from 12% to 10%
- April 2024: NIC main rate further cut from 10% to 8%; dividend allowance cut to £500
- April 2025: non-dom remittance basis abolished; replaced with residence-based system
- April 2026: National Living Wage to £12.71/hr; State Pension age begins phased rise to 67
What fiscal drag actually costs you
A simple illustration. Someone earning £45,000 in 2021:
- Personal Allowance: £12,570 (fresh freeze)
- Tax on the remaining £32,430 at 20% = £6,486
The same person in 2026 still earning £45,000 (no pay rise): tax is unchanged. But most workers got pay rises. If they now earn £54,000 (roughly matching inflation since 2021):
- Personal Allowance: still £12,570
- Higher-rate threshold: still £50,270
- Tax on £12,571–£50,270 (basic band) at 20% = £7,540
- Tax on £50,271–£54,000 (higher band) at 40% = £1,492
- Total: £9,032 — £2,546 more than in 2021
Inflation-adjusted, their real earnings are flat. Their real tax bill has risen 39%.
Scotland's parallel track
Scottish income tax changes run on a different cycle to rUK. The Scottish Government sets its own bands each year via the Scottish Budget. Notable recent changes:
- 2024/25: new 45% "advanced rate" band introduced
- 2024/25: top rate increased from 47% to 48%
- 2025/26: Higher-rate threshold rose slightly; most other bands unchanged
Scotland continues to apply more graduated rates than rUK, especially for earners above £43,663.
How to stay on top of changes
- Autumn Budget (typically late October / early November): the main vehicle for tax policy changes. Watch the Chancellor's statement and HMT's published measures.
- Spring Statement (typically mid-March): secondary statement, sometimes contains tax updates.
- 6 April: new tax year starts. Changes announced in the previous Autumn Budget typically take effect.
- HMRC guidance updates: published continuously at gov.uk. Subscribe to HMRC's email alerts.
Quick links
- UK Tax Guide 2026/27
- UK Tax Year 2026/27
- UK Income Tax Rates & Bands
- UK Personal Allowance
- UK Income Tax Calculator
