UK Income Tax Bands and Allowances – What You Need to Know for 2025/26

Current Income Tax Rates and Allowances

For the tax year 2025/26, most taxpayers in England, Wales and Northern Ireland benefit from a personal allowance of £12,570.

Anything earnt above this threshold is taxed according to the following tax bands:

• 20% on income from £12,571 to £50,270
• 40% on income between £50,271 and £125,140
• 45% on income above £125,140

For individuals whose total income (after allowances) exceeds £100,000, the personal allowance is gradually reduced. This reduction is by £1 for every £2 of income over the £100,000 threshold. Once you earn £125,140, the tax-free allowance becomes completely void, meaning all of your income becomes taxable.

Those who live in Scotland abide by a different set of rates and bands. This includes a starter rate of 19% and additional bands for basic, intermediate, higher and top rates.

Why These Rules Matter

Understanding income tax bands and how personal allowance works is crucial to ensure you:

• Know how much of your income is tax-free
• Plan accordingly if your income falls within the allowance withdrawal threshold (often referred to as the “£100,000–£125,140 trap”)
• Avoid unexpected tax liabilities, especially if you have multiple income sources (salary, dividends, rental income, etc.)

The impact remains especially relevant given a situation where earnings may rise but allowances remain frozen – this will lead to more individuals being pushed into higher tax bands over time.

What Hasn’t Changed (and What That Means)

• The personal allowance remains at £12,570, as it has been since 2021.
• Basic, higher and additional rates remain at 20%, 40% and 45% respectively, with the same income thresholds remaining in place for 2025/26.
• The diminishing effect for the personal allowance remains, meaning once your net income exceeds £100,000 the allowance starts decreasing.

As these thresholds are static, inflation and salary increases may push more people into higher tax bands even when, in reality, their income hasn’t increased – in effect, it’s their tax burden that has increased over time.

Who Is Affected

This applies to employees, self employed individuals, pension recipients, landlords and anyone receiving taxable income over £12,570. It also includes individuals whose income fluctuates or passes the £100,000 threshold, especially relevant for high earners, business owners or people with more than one source of income. It applies to UK taxpayers generally, with specific attention required for those who reside in Scotland due to Scottish tax bands being different.

What to Watch Out For

• If taxable income exceeds £100,000, the reduction of your personal allowance takes effect, disappearing entirely once you reach £125,140
• Additional sources of income (bonuses, dividends, rental income, etc.) can push you into higher tax bands or cause allowance withdrawal
• For those residing in Scotland, different rates and bands will apply - check for Scottish-specific tables
• Frozen thresholds may cause increases due to inflation to be taxable, even if your real income doesn’t rise

How DSK Accountants Can Help

At DSK, we provide clear and practical advice on personal tax planning, helping you review how your income is structured across salary, dividends, rental income and pensions. We also assess whether your income might trigger allowance withdrawal or place you in higher tax bands, and plan tax efficient strategies to minimise liability. We offer guidance tailored to your circumstances, whether you are resident in Scotland or a UK citizen with multiple income sources. If you would like a personal tax review or tailored advice, please contact us today.