Personal Tax

Tax bands and rates

The basic rate band remains at £37,700, with the higher rate threshold remaining at £50,270. The
additional rate threshold remains at £125,140. The freeze of these thresholds will continue until 5
April 2031. The National Insurance contributions (NICs) Primary Threshold and Lower Profits Limit
remain at £12,570. The NICs Upper Earnings Limit and Upper Profits Limit will remain aligned to the
higher rate threshold at £50,270 up to 5 April 2031 as well. Other employer NICs relief thresholds
aligned to the Upper Earnings Limit will also be maintained at this level.

The additional rate for non-savings and non-dividend income will apply to taxpayers in England, Wales
and Northern Ireland. The additional rate for savings and dividend income will apply to the whole of
the UK.

Scottish residents

The tax on income (other than savings and dividend income) is different for taxpayers who are
resident in Scotland from that paid by taxpayers resident elsewhere in the UK. The Scottish Income Tax
rates and bands apply to income such as employment income, self-employed trade profits and property
income.

The rates and bands for 2027/28 will be announced in the Scottish Budget. Scottish taxpayers are
entitled to the same Personal Allowance as individuals in the rest of the UK.

Welsh residents

Since April 2019, the Welsh Government has had the right to vary the rates of Income Tax payable by
Welsh taxpayers (other than tax on savings and dividend income). For 2026/27 the tax payable by Welsh
taxpayers is the same as that payable by English and Northern Irish taxpayers. This will continue
for 2027/28 subject to the Welsh Budget.

The Personal Allowance

The Income Tax Personal Allowance is fixed at the current level of £12,570 and will remain frozen until
5 April 2031.

There is a reduction in the Personal Allowance for those with ‘adjusted net income’ over £100,000. The
reduction is £1 for every £2 of income above £100,000. This means that there is no Personal Allowance
where adjusted net income exceeds £125,140.

The government will increase the Married Couple’s Allowance from 6 April 2027 by the CPI rate for
September 2026 of 3.5%.

The government will increase the Blind Person’s Allowance from 6 April 2027 to £3,370.

Tax on property income

Property income is any income from letting land and buildings.

Individuals have a Property Allowance. This exempts property income of £1,000 or less. Property income
over £1,000 can be offset either by the £1,000 Property Allowance or by deducting relevant expenses.

The government is increasing the rates of Income Tax applicable to property income by 2% from the
previous rates announced at Budget 2025. The separate tax rates for property income from 2027/28 are:

24% for basic rate taxpayers
44% for higher rate taxpayers
49% for additional rate taxpayers.

Comment

The government has also legislated to allow the Scottish and Welsh governments to set their own
rates of taxation for property income for 2027/28. It remains to be seen whether either
government decides to do so.

Tax on savings income

Savings income is income such as bank and building society interest.

The Savings Allowance applies to savings income and the available allowance in a tax year depends on
the individual’s marginal rate of Income Tax. Broadly, individuals taxed at up to the basic rate of tax
have an allowance of £1,000. For higher rate taxpayers the allowance is £500. No allowance is due to
additional rate taxpayers.

Savings income within the allowance still counts towards an individual’s basic or higher rate band and
so may affect the rate of tax paid on savings above the Savings Allowance.

Some individuals qualify for a 0% starting rate of tax on savings income up to £5,000. This will remain
at £5,000 until 5 April 2031. However, the rate is not available if taxable non-savings income (broadly
earnings, pensions, trading profits and property income, less allocated allowances and reliefs) exceeds
£5,000.

From 6 April 2027, the government is increasing the previously announced 2% increase in the applicable
tax rates by a further 2%. The basic rate will increase to 24%, the higher rate will increase to 44%
and the additional rate will increase to 49%.

Tax on dividends

These rules apply to the whole of the UK.

Currently, the first £500 of dividends is chargeable to tax at 0% (the Dividend Allowance). This
£500 Dividend Allowance is retained for 2027/28.

Dividends received above the Dividend Allowance will be taxed at the following rates for 2027/28:

10.75% for basic rate taxpayers
35.75% for higher rate taxpayers
39.35% for additional rate taxpayers.

Dividends within the allowance still count towards an individual’s basic or higher rate band and so may
affect the rate of tax paid on dividends above the Dividend Allowance.

To determine which tax band dividends fall into, dividends are treated as the last type of income to be
taxed.

Income Tax ordering rules

The Income Tax ordering rules will change from 6 April 2027. The Personal Allowance will be deducted
from employment, trading or pension income first. Currently, individuals can choose which income the
allowance is offset against.

Pension tax limits

For 2027/28:

The Annual Allowance (AA) is £60,000.
Individuals who have ‘threshold income’ for a tax year of greater than £200,000 have their AA for
that tax year restricted. It is reduced by £1 for every £2 of ‘adjusted income’ over £260,000, to a
minimum AA of £10,000.
The Lump Sum Allowance, which relates to the general maximum that may be able to be taken as a
tax-free lump sum, is £268,275.
The Lump Sum and Death Benefit Allowance, which relates to the general maximum that may be able to
be taken as a tax-free lump sum in certain circumstances, is £1,073,100.

Pension Tax Allowance

The government will introduce a Pension Tax Allowance from 6 April 2027. It will be available for tax
years 2027/28 to 2029/30.

The allowance ensures that pensioners whose total income is up to the value of the full new State
Pension do not pay Income Tax. The Pension Tax Allowance will operate as a tax reducer at 20% of the
value of the allowance.

The full allowance will effectively be the value of the new State Pension at £13,037. For every £3 of
income received by an individual over the new State Pension, the Pension Tax Allowance will be reduced
by £1.

For 2027/28:

If total income is below the Personal Allowance (£12,570) there will be no tax liability.
If total income is between £12,570 and £13,037, the full Pension Tax Allowance is available (worth
up to £94).
If total income is between £13,037 and £13,319, some of the Pension Tax Allowance is available and
less income tax will be due than otherwise would be.
If total income is £13,319 or more, none of the Pension Tax Allowance will be available.

For tax years 2028/29 and 2029/30, the allowance will be uprated in line with the full annual value of
the new State Pension.

Trading Allowance

From 6 April 2027, the Trading Allowance will increase from £1,000 to £3,000. The allowance provides
relief for trading and miscellaneous income. Where the relief is chosen and the allowance covers all
relevant income before expenses, the individual will not have to declare or pay tax on this income. The
trading income reporting threshold for Self Assessment will also increase to £3,000 at the same time.

Individual Savings Accounts

For 2027/28, the overall limits are as follows:

Individual Savings Accounts (ISAs) £20,000
Junior ISAs £9,000
Lifetime ISAs £4,000 (excluding government bonus)
Child Trust Funds £9,000.

These limits will remain frozen until 5 April 2031.

From April 2027, the cash ISA limit will remain at £20,000 for all savers 18 years old or over. The
government will work with industry to explore a new ISA incentive for people investing in a stocks and
shares ISA for the first time.

A new First-Time Buyer ISA will be launched in April 2029. It will replace the Lifetime ISA
for new savers. It will provide a 25% bonus on the final account balance up to a maximum of £20,000,
paid on withdrawal, towards a purchase of a first home costing up to £450,000.

Existing Lifetime ISA holders will be able to continue contributing to and using their
accounts under the current rules. There will also be a reduction in the withdrawal charge for purchases
of properties above the Lifetime ISA property cap. The charge is to be reduced from 25% to 20% from 29
October 2026.

Self Assessment payments on account

From April 2029, taxpayers who make payments on account will be required to make more regular in-year
payments towards their final tax bill. The payments will be automated and eligible taxpayers will be
able to choose to pay through Pay As You Earn (PAYE).

Making Tax Digital

The government will not apply the late submission penalty points to quarterly updates for the tax year
2027/28, where the taxpayer was required to join Making Tax Digital (MTD) for Income Tax from April
2027.

The following groups will also be exempted from MTD until further notice:

those eligible for qualifying care relief
non-UK resident foreign entertainers and sportspeople
expected non-resident customers.

Autumn Budget