Your Complete Guide To Personal Tax Allowances in 2026
Working out how your personal tax allowances impact your income is an important part of good financial planning. Here’s what you need to know about personal tax allowances in 2026/27, including how they work and the tax thresholds for the 2026/27 tax year.
Personal Allowance and Tax Thresholds for 2026/27
Since the start of the 2022/23 tax year, the UK government has frozen personal tax allowances and thresholds.
For 2026/27 tax year starting 6 April 2026, this means the following:
The personal Allowance is 12,570, the basic tax-free allowance that every taxpayer can earn before paying Income Tax.
As long as your total income remains below this threshold you will not pay any Income Tax. Once you earn more than £12,570 you’ll be liable for Income Tax at the appropriate rate for your tax band.
The government has announced that personal allowance will now remain frozen until 2031.
Income Tax Rates and Tax Bands for 2026/27
Income Tax rates and thresholds for England, Wales, and Northern Ireland for 2026/27:
Personal allowance: £12,570 - Tax-free
Basic rate (20%): £12,571 to £50,270
Higher rate (40%): £50,271 to £125,140
Additional rate (45%): £125,140+
As before, this means the Basic rate limit is frozen at £37,700. Combined with the personal allowance, this gives the higher-rate threshold of £50,270.
How Your Personal Allowance Is Reduced
If your adjusted net income is over £100,000 then your personal allowance will start to get reduced.
- Your personal allowance is reduced by £1 for every £2 you earn over £100,000
- Your personal allowance gets reduced to £0 when your income hits £125,140
You pay higher rate tax on 40% of the income between £100,000 and £125,140. This creates a temporary marginal tax rate of 60%, making tax planning important for higher earners.
Marriage Allowance
The Marriage Allowance remains at £1,260 for 2026/27.
This allows one partner who earns below the personal allowance limit to transfer £1,260 of their allowance to their spouse or civil partner. The partner receiving the allowance must be a basic-rate taxpayer.
This allows you to reduce your partner’s tax bill by up to £252 each year.
Blind Person’s Allowance
Blind Person’s allowance is expected to increase to £3,250 for 2026/27.
The Blind Person’s allowance is worth an extra £3,250 on top of your usual Personal allowance.
You can also transfer your Blind Person’s allowance to your spouse or civil partner if you don’t use it.
Dividend Allowance 2026
The Dividend Allowance is expected to remain at a low level, following recent reductions. In 2025/26, it stands at £500, and no significant increase has been announced for 2026/27.
Rate at which dividends are taxed in 2026:
Basic rate: 10.75%
Higher rate: 35.75%
Additional rate: 39.35%
While allowances have been cut, taxes payable on dividends have increased. As a result dividend income has become far more important for personal tax planning.
National Insurance Thresholds
For 2026/27, the National Insurance Primary Threshold and Lower Profits Limit remain aligned with the Personal Allowance at £12,570. We can expect these thresholds to remain frozen until 2031.
What do Personal Tax Allowances Mean For You?
When tax thresholds are frozen while wages increase year on year, many more people find themselves in higher tax bands. This process is sometimes called fiscal drag.
Knowing where you sit can help you to:
- Forecast how much tax you’ll pay.
- Make better pension & savings decisions.
- Avoid unexpected tax bills.
- Plan for legitimate tax efficiency.
Work with a qualified accountant who can guide you through your tax situation.
Let Phinch Help You Understand Your Taxes
Tax rules can be complicated, particularly when your allowance starts to get tapered off or if you have multiple sources of income. By partnering with a qualified accountant you can rest easy knowing you’re compliant with all tax obligations, while optimising what you keep.
Here at Phinch, we break down your tax position into plain English so you know where you stand, allowing yo to plan better for the future.
