UK Tax Rates and Allowances 2026/27 — The Full Reference

The one number that matters more than people think — the frozen personal allowance

Income tax for England, Wales and Northern Ireland in 2026/27 still follows the same band structure most freelancers memorised years ago. The rates haven't moved. What has changed — quietly, and more expensively than most headlines suggest — is how long those bands have sat still while wages haven't.

Band	Taxable income	Rate
Personal allowance	Up to £12,570	0%
Basic rate	£12,571 – £50,270	20%
Higher rate	£50,271 – £125,140	40%
Additional rate	Above £125,140	45%

The personal allowance has been frozen at £12,570 since 2021/22 and is scheduled to stay there until at least April 2028. That means fiscal drag: as your income rises with inflation or rate increases, more of it falls into higher bands every year without any headline rate change. It's a stealth tax rise — the same effect as pushing up rates, achieved without a vote on rates themselves — and it hits freelancers on upward trajectories harder than static "nothing changed this year" summaries imply.

There's a second trap in the same band table. Between £100,000 and £125,140, your personal allowance tapers away at £1 for every £2 earned over £100,000, creating an effective marginal rate of around 60% on income in that band. That's higher than the 45% additional rate that only kicks in above £125,140 — and it catches more contractors and consultants than the additional rate ever will. If you're planning a pension contribution or timing a dividend, this band deserves more attention than the top rate headline.

National Insurance — where the real cost difference lives

National Insurance is often treated as a footnote to income tax. For freelancers and company directors, it's frequently where the structure decision actually lives — especially since the April 2025 employer NI changes reshaped what a "sensible salary" looks like.

Category	Earnings / profits	Rate
Employee NI (Class 1)	£12,570 – £50,270	8%
Employee NI (Class 1)	Above £50,270	2%
Employer NI (Class 1)	Above £5,000	15%
Self-employed (Class 4)	£12,570 – £50,270	9%
Self-employed (Class 4)	Above £50,270	2%

The April 2025 cut in the employer secondary threshold from £9,100 to £5,000, combined with the employer rate rising from 13.8% to 15%, is the change that quietly reshaped contractor economics more than any dividend tweak. It's exactly why £5,000 became the default "optimal salary" figure you'll see across adviser blogs and calculators — it sits right at the new threshold, keeping employer NI at nil while still potentially counting as a qualifying year for State Pension subject to wider rules. Class 2 NI — the old flat weekly charge on self-employed profits — was scrapped entirely from April 2024. Self-employed people now deal with Class 4 only.

For how NI interacts with State Pension qualifying years and the abolition of Class 2, see our National Insurance guide.

Dividend tax — the allowance has been cut three times in three years

Band	Rate
Dividend allowance (first £500)	0%
Basic rate	8.75%
Higher rate	33.75%
Additional rate	39.35%

The allowance didn't fall in one step. It was eroded deliberately:

Tax year	Dividend allowance
2022/23	£2,000
2023/24	£1,000
2024/25 onwards	£500

A 75% cut in two steps, with relatively little public debate compared to changes of similar fiscal size elsewhere. If you set up a limited company a few years ago and haven't revisited your salary and dividend split since, the maths that worked then may not be optimal now. Allowance cuts plus the employer NI threshold change together moved the sole-trader-versus-Ltd crossover point meaningfully higher — which is why generic "incorporate above £30k" advice has aged badly.

Corporation tax

Profits	Rate
Up to £50,000	19% (small profits rate)
£50,001 – £250,000	19%–25% (marginal relief)
Above £250,000	25% (main rate)

Most single-director contractor companies sit under £50,000 profit after a sensible salary, so 19% is the rate that actually matters to most readers. The marginal relief band gets disproportionate explainer attention relative to how few small companies ever land in it — it's real, but it's not where most freelancers live. If you control more than one company, the £50,000 and £250,000 thresholds divide between associated companies, which can pull a seemingly small business into higher effective rates faster than the headline numbers suggest.

VAT thresholds

Threshold	Amount
Registration threshold	£90,000
Deregistration threshold	£88,000
Flat Rate Scheme — join	£150,000
Flat Rate Scheme — leave	£230,000

The gap between the £90,000 registration threshold and the £88,000 deregistration threshold is deliberate — a buffer to stop businesses bouncing in and out of VAT registration as turnover fluctuates slightly around the line. Standard VAT rates remain 20% standard, 5% reduced, and 0% zero-rated on qualifying supplies.

Mileage rates — the first change in fifteen years

Vehicle	Rate
Car or van — first 10,000 miles	55p per mile
Car or van — after 10,000 miles	25p per mile
Motorcycle	24p per mile
Bicycle	20p per mile

The car rate sat at 45p since 2011 while running costs rose steadily. The increase to 55p, announced on 21 May 2026 and backdated to 6 April 2026, is overdue rather than generous — even 55p arguably undershoots what inflation-adjusted 2011 value would imply today. The backdating matters in practice: if you already claimed at 45p earlier in this tax year, you can revise upward for the full period from 6 April 2026.

Capital Gains Tax and pensions, briefly

Item	2026/27
CGT — basic rate (most assets)	18%
CGT — higher rate (most assets)	24%
CGT annual exempt amount	£3,000
Pension annual allowance	£60,000
Lifetime allowance	Abolished (from April 2024)

The CGT exempt amount was £12,300 as recently as 2022/23. At £3,000 now, fairly modest gains on shares or business assets can trigger reporting obligations that wouldn't have applied a few years ago — worth remembering if you're planning a disposal alongside your main freelance income.

Key Self Assessment dates 2026/27

Deadlines for the 2026/27 tax year (6 April 2026 to 5 April 2027):

Date	Deadline
6 April 2026	2026/27 tax year begins
5 October 2027	Register with HMRC if newly self-employed
31 October 2027	Paper Self Assessment return deadline
31 January 2028	Online filing and balancing payment due
31 January 2028	First payment on account due
31 July 2028	Second payment on account due

What actually changed this year — the honest summary

Plainly: the mileage rate increase is the only headline rate change for 2026/27. Income tax bands, NI rates and thresholds, dividend tax, corporation tax, VAT registration limits, and the pension annual allowance are all frozen at 2025/26 levels.

But a year of "nothing changed" against frozen allowances and thresholds is itself a stealth tax rise. More income gets pulled into higher bands every year purely because the bands didn't move while wages did. If you're comparing this year to last and seeing a higher bill without a rate change on paper, fiscal drag is probably why — not a mistake in your spreadsheet.

Frequently asked questions

Why does the personal allowance freeze matter if the rate itself hasn't gone up?

Because as wages rise and the allowance and thresholds stay fixed, more of your income falls into higher bands each year — the same effect as a tax rise, achieved without anyone voting on a rate change. This is widely referred to as fiscal drag.

What is the effective tax rate between £100,000 and £125,140?

Around 60%, once you account for the personal allowance tapering away at £1 for every £2 earned. It's higher than the 45% additional rate that applies well above this band, which surprises a lot of people.

Has the dividend allowance always been this low?

No — it was £2,000 as recently as 2022/23, cut to £1,000 in 2023/24, then to £500 from 2024/25. It hasn't moved since.

What was the one major change for 2026/27?

The HMRC mileage rate for cars and vans rising from 45p to 55p per mile for the first 10,000 miles, the first change since 2011. Every other major rate and threshold mentioned on this page is unchanged from 2025/26.