The HMRC tax-free Personal Allowance threshold has been officially confirmed for the 2026/27 tax year. Direct taxes, such as income tax and National Insurance contributions, are paid directly by taxpayers to the government. In contrast, indirect taxes are collected by intermediaries like retailers or producers and then remitted to the government.
Income Tax Rates for 2026/27
Income tax on earned income is charged at three progressive rates: the basic rate, the higher rate, and the additional rate. For 2026/27, these rates remain at 20%, 40%, and 45%, respectively. HM Treasury has confirmed that no tax is levied on income up to the Personal Allowance, which stands at £12,570 for 2026/27. This threshold has been frozen at this level since April 2022 and is scheduled to remain unchanged until April 2031.
How the Tax Bands Work
The next £37,700 of income, up to the higher rate threshold of £50,270, is taxed at the basic rate of 20%. Income above the higher rate threshold, up to the additional rate threshold of £125,140, is taxed at 40%. Any income exceeding £125,140 is subject to the additional rate of 45%.
The Personal Allowance begins to be withdrawn for individuals with earnings above £100,000, reducing by £1 for every £2 of income over this limit. Once earnings reach £125,140, the allowance is completely withdrawn, resulting in a Personal Allowance of £0.
No Changes from Previous Year
All three tax rates and thresholds remain unchanged from the 2025/26 tax year. The Personal Allowance for income tax is set at £12,570 for 2026/27, and like the basic rate limit, it has been fixed since 2021/22. It is expected to stay at this level until 2030/31.
Geographical Application
Changes to the Personal Allowance apply across the entire United Kingdom. However, adjustments to the basic rate limit and the higher rate threshold apply to non-savings, dividend, and property income in England, Wales, and Northern Ireland, as well as to savings and dividend income throughout the UK. For Scottish taxpayers, income tax rates and rate limits are determined by the Scottish Parliament.
