Income tax thresholds remain frozen: check your band and allowances

The UK government has confirmed that income tax thresholds will remain frozen for the 2026–27 tax year. This means the income levels at which you move into higher tax bands will not rise with inflation, potentially reducing your take-home pay if your salary increases.

Current UK income tax bands

• Personal allowance: £12,570 (0% tax)
• Basic rate: £12,571-£50,270 (20%)
• Higher rate: £50,271-£125,140 (40%)
• Additional rate: over £125,140 (45%)

Other key tax changes

ISA allowance: The annual ISA allowance remains unchanged at £20,000. This could impact your tax-efficient savings strategy.

Dividend allowance: The dividend allowance has also been frozen at £1,000, meaning more of your dividend income could be subject to tax.

With these thresholds and allowances frozen, even modest salary increases, savings, or dividend income could push you into higher tax brackets or increase taxable income.

What you should do

• Check your tax code: Make sure it’s accurate on your payslip.
• Review your income: Consider how salary, dividends, and savings might affect your overall tax position.
• Use HMRC tools: The HMRC App or online portal can help you check your tax position and any potential refunds.
• Plan ahead: Speak to a professional about tax planning, allowances, and optimising your savings.

Looking for advice?

At Verallo, we help individuals understand how tax changes could impact their finances. Get in touch with our experts for support with reviewing your income, allowances, and plan for the year ahead.