UK Tax Help Sheet 2025/26

What is the Personal Allowance?

The Personal Allowance is the amount you can earn in a tax year without paying Income Tax. In the UK, tax years run from 6th April to 5th April.

• For employees, this allowance is automatically applied through PAYE (Pay As You Earn).

• For the self-employed, it’s applied when HMRC calculates your tax after filing your Self Assessment.

• Company directors typically use a mix of salary and dividends to maximise personal allowances.

Personal Allowance for 2025/26

• £12,570 tax-free income.

• Reduced by £1 for every £2 earned above £100,000.

• Lost completely above £125,140.

Additional allowances may apply, including:

• Marriage Allowance – transfer up to £1,260 of unused allowance to your spouse.

• Blind Person’s Allowance – an extra £3,070–£3,130 depending on the tax year.

Other Key Allowances

• Trading allowance: £1,000 for self-employed trading income.

• Property allowance: £1,000 for property income.

• Personal Savings Allowance (PSA): £1,000 for basic-rate, £500 for higher-rate taxpayers.

• Starting rate for savings: £5,000 for lower-income earners (

Income Tax Rates & Bands

Income above the Personal Allowance is taxed in bands:

England, Wales & NI (2024/25 & 2025/26)

• Basic: 20% (£12,571 – £50,270)

• Higher: 40% (£50,271 – £125,140)

• Additional: 45% (over £125,140)

Scottish Rates include more bands, starting from 19% to a top rate of 48%.

Dividends & Capital Gains

• Dividend allowance: £500 tax-free. Rates: Basic 8.75%, Higher 33.75%, Additional 39.35%.

• Capital Gains annual exemption: £3,000. Rates depend on income and asset type.

National Insurance Contributions (NICs)

Employees: 12% on earnings £12,570–£50,270; 2% above £50,270.
Self-employed: Class 2 voluntary under £6,845; Class 4 at 6% on £12,570–£50,270, 2% above.

Corporation Tax & VAT

• Corporation Tax: 19–25% on company profits.

• VAT registration threshold: £90,000. Standard rate: 20%; reduced 5%; zero 0%.

Other Practical Notes

• Mileage allowances: Cars £0.45/mile for first 10,000 miles, then £0.25/mile.

• Director loans over £10,000 incur interest and may trigger additional Corporation Tax if unpaid.

• Contributing to pensions or giving via Gift Aid reduces taxable income.