How the 2026/27 UK Tax Changes Affect Your Take-Home Pay
Every April, the UK tax landscape shifts. Some years bring dramatic rate changes; other years the biggest impact comes from what doesn't change. For 2026/27, the continued freeze on income tax thresholds is arguably the most significant policy affecting millions of workers, quietly increasing the amount of tax they pay without any change to headline rates.
In this guide, we break down every key change for the 2026/27 tax year, explain how each one affects your take-home pay, and provide worked examples for three common salary levels. Whether you earn £30,000, £50,000, or £80,000, you will find a clear picture of what to expect on your payslip from April 2026.
1. Income Tax Thresholds and Rates: The Fiscal Drag Effect
The headline income tax rates for England, Wales, and Northern Ireland remain unchanged for 2026/27. However, the real story is that the thresholds have been frozen since 2021 and will remain so until at least 2030/31.
| Tax Band | Taxable Income | Tax Rate |
|---|---|---|
| Personal Allowance | £0 - £12,570 | 0% |
| Basic Rate | £12,571 - £50,270 | 20% |
| Higher Rate | £50,271 - £125,140 | 40% |
| Additional Rate | Over £125,140 | 45% |
The frozen higher rate threshold at £50,270 is particularly significant. With average earnings growth running at around 4-5%, anyone earning between £48,000 and £52,000 could find themselves crossing into the 40% band for the first time. The Office for Budget Responsibility estimates that over a million additional people will become higher rate taxpayers by the time the freeze ends.
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2. National Insurance Changes
Employee National Insurance rates remain the same for 2026/27, but the employer landscape has changed significantly since the October 2024 Budget:
Employee NI Rates (Unchanged)
| Earnings Band | Rate |
|---|---|
| Below £12,570 (Primary Threshold) | 0% |
| £12,570 - £50,270 | 8% |
| Above £50,270 | 2% |
Employer NI: The Hidden Impact
While employer NI does not come directly out of your payslip, it significantly affects the total cost of employment. From April 2025, employer NI rose from 13.8% to 15%, and the threshold at which employers start paying dropped from £9,100 to £5,000. These rates and thresholds continue into 2026/27.
It is worth noting that employees have benefited from the NI rate reductions in recent years. The employee rate dropped from 12% to 10% in January 2024, and then to 8% in April 2024. These reductions remain in place for 2026/27, providing some offset to the fiscal drag from frozen income tax thresholds.
3. Student Loan Repayment Thresholds
Student loan repayment thresholds have been updated for 2026/27:
| Loan Type | Annual Threshold | Repayment Rate |
|---|---|---|
| Plan 1 (pre-2012) | £25,000 | 9% |
| Plan 2 (post-2012) | £29,385 | 9% |
| Plan 5 (post-2023) | £25,000 | 9% |
| Postgraduate Loan | £21,000 | 6% |
The Plan 2 threshold of £29,385 is set to be frozen at that level for three years from April 2027, meaning graduates will continue to repay more as their wages grow. You can estimate your repayments using our Student Loan Calculator.
4. Pension Annual Allowance and Lifetime Allowance
The pension annual allowance remains at £60,000 for 2026/27. This is the maximum you can contribute to pensions in a single tax year and still receive tax relief. Key points:
- Carry forward: You can carry forward unused allowance from the previous three tax years, potentially allowing contributions of up to £180,000 or more in a single year
- Tapered annual allowance: For those with adjusted income above £260,000, the allowance reduces by £1 for every £2 over the threshold, down to a minimum of £10,000
- Money Purchase Annual Allowance: If you have flexibly accessed your pension, your annual allowance for defined contribution pensions is £10,000
- Lifetime Allowance: The lifetime allowance was abolished from April 2024 and replaced with new lump sum limits. The lump sum allowance remains at £268,275 and the lump sum and death benefit allowance at £1,073,100
5. State Pension Triple Lock Increase
The State Pension receives a 4.8% increase from April 2026 under the triple lock guarantee, which uprates the pension by the highest of earnings growth, CPI inflation, or 2.5%.
| State Pension Type | 2025/26 Weekly | 2026/27 Weekly | Annual Increase |
|---|---|---|---|
| Full New State Pension | £230.25 | £241.30 | +£575 per year |
| Basic State Pension | £176.45 | £184.90 | +£439 per year |
6. National Minimum Wage Increases
From 1 April 2026, the National Living Wage and National Minimum Wage rates increase across all age bands:
| Age Group | 2025/26 Rate | 2026/27 Rate | Increase |
|---|---|---|---|
| 21 and over (NLW) | £12.21/hr | £12.71/hr | +4.1% |
| 18-20 year olds | £10.00/hr | £10.85/hr | +8.5% |
| 16-17 year olds | £7.55/hr | £8.00/hr | +6.0% |
| Apprentice rate | £7.55/hr | £8.00/hr | +6.0% |
For a full-time worker on the National Living Wage (37.5 hours per week), the annual gross salary rises from approximately £23,809 to £24,785 - an increase of roughly £976 per year before tax and NI.
7. Practical Examples: Take-Home Pay at Three Salary Levels
Below are approximate annual take-home pay calculations for the 2026/27 tax year for three common salary levels in England, Wales, or Northern Ireland. These assume a standard tax code (1257L), no student loan, and no pension contributions. Use our Salary Calculator for a personalised breakdown.
Example 1: £30,000 Salary
Income Tax:
Personal Allowance (£0 - £12,570): £0
Basic Rate (£12,571 - £30,000): £17,430 x 20% = £3,486.00
Total Income Tax: £3,486.00
National Insurance:
Below threshold (£0 - £12,570): £0
Main rate (£12,571 - £30,000): £17,430 x 8% = £1,394.40
Total NI: £1,394.40
Total Annual Deductions: £4,880.40
Annual Take-Home: £25,119.60
Monthly Take-Home: £2,093.30
Example 2: £50,000 Salary
Income Tax:
Personal Allowance (£0 - £12,570): £0
Basic Rate (£12,571 - £50,000): £37,430 x 20% = £7,486.00
Total Income Tax: £7,486.00
National Insurance:
Below threshold (£0 - £12,570): £0
Main rate (£12,571 - £50,000): £37,430 x 8% = £2,994.40
Total NI: £2,994.40
Total Annual Deductions: £10,480.40
Annual Take-Home: £39,519.60
Monthly Take-Home: £3,293.30
Example 3: £80,000 Salary
Income Tax:
Personal Allowance (£0 - £12,570): £0
Basic Rate (£12,571 - £50,270): £37,700 x 20% = £7,540.00
Higher Rate (£50,271 - £80,000): £29,730 x 40% = £11,892.00
Total Income Tax: £19,432.00
National Insurance:
Below threshold (£0 - £12,570): £0
Main rate (£12,571 - £50,270): £37,700 x 8% = £3,016.00
Upper rate (£50,271 - £80,000): £29,730 x 2% = £594.60
Total NI: £3,610.60
Total Annual Deductions: £23,042.60
Annual Take-Home: £56,957.40
Monthly Take-Home: £4,746.45
Get Your Exact Take-Home Pay
These are simplified examples. Your actual take-home depends on pension contributions, student loans, tax code, and other factors.
Use Our Take Home Pay CalculatorFrequently Asked Questions
Q: Will income tax thresholds be unfrozen before 2030/31?
The government has legislated the freeze through to 5 April 2028, with the current policy intention being to maintain the freeze until at least 2030/31. Any early unfreezing would require new legislation and is considered unlikely given current fiscal pressures. The freeze is estimated to raise over £40 billion in additional revenue by 2029/30.
Q: How do the 2026/27 changes affect Scottish taxpayers?
Scotland sets its own income tax rates and bands, which are generally more progressive. Scottish taxpayers have a starter rate of 19%, and the higher rate kicks in at a lower threshold than in the rest of the UK. The personal allowance (£12,570) is set by Westminster and applies UK-wide. If your tax code starts with 'S', you pay Scottish rates. Check your specific position with our Income Tax Calculator.
Q: I earn near the £50,270 threshold. Should I increase pension contributions?
This can be very tax-efficient. Pension contributions reduce your taxable income, potentially keeping you in the basic rate band. If you earn £52,000, contributing £1,730 to your pension via salary sacrifice saves you 40% income tax and 2% NI on that amount (£756 in total), plus the money grows tax-free. Use our Pension Calculator to model different scenarios.
Q: Will the State Pension exceed the personal allowance soon?
At the current trajectory, yes. The full new State Pension for 2026/27 is £12,547.60 per year, just £22.40 below the £12,570 personal allowance. If the triple lock delivers a similar increase in 2027/28, the State Pension alone would exceed the personal allowance, meaning pensioners with no other income would pay income tax for the first time. This is likely to become a major political issue.
Q: How do dividend tax changes in 2026/27 affect me?
From April 2026, dividend tax rates increase: the basic rate rises from 8.75% to 10.75%, the higher rate from 33.75% to 35.75%, and the additional rate from 39.35% to 41.25%. Combined with the reduced dividend allowance of £500 (down from £1,000 in 2023/24), this particularly affects small business owners who pay themselves via dividends. Consider reviewing your remuneration strategy with an accountant.
What You Can Do to Maximise Your Take-Home Pay
- Review your tax code: Check your payslip for code 1257L. If it is different, log into your HMRC Personal Tax Account to check it is correct
- Maximise pension contributions: Especially if you earn near a tax band threshold (£50,270 or £100,000)
- Use your ISA allowance: The £20,000 annual ISA allowance shelters income and gains from tax
- Claim Marriage Allowance: Worth up to £252 per year if one partner earns below £12,570 and the other is a basic rate taxpayer
- Check salary sacrifice options: Cycle to work, enhanced pension contributions, and electric car schemes can reduce your tax and NI
- Claim work expenses: Professional subscriptions, uniform costs, and working-from-home relief if eligible
Related Calculators & Guides
- Salary Calculator - See your exact monthly and annual take-home pay
- Tax Calculator - Calculate your full income tax liability
- Income Tax Calculator - Detailed income tax breakdown
- NI Calculator - Work out your National Insurance contributions
- Pension Calculator - Plan contributions and estimate retirement income
- Student Loan Calculator - Estimate student loan repayments
- Take Home Pay Calculator - Complete take-home pay breakdown