The year 2026 brings important changes to the UK tax system. How will tax rates and thresholds change for individuals and employers? Read on to find out what the changes mean and how to prepare for them.
Tax Changes in the UK for 2026: What to Expect
The year 2026 introduces significant changes to the UK’s tax system, affecting both individuals and employers. Tax rates, thresholds for tax allowances, and other key factors will be adjusted. In this article, we will focus on these changes and how to best prepare for them.
Key Tax Rates for 2026
For 2026, the following tax rates will apply to individuals:
Basic rate: 20% on income above the basic threshold.
Higher rate: 40% on income between the specified threshold and higher amounts.
Additional rate: 45% on income exceeding the highest threshold.
This system applies to both income from employment and self-employment. In 2026, a rise in thresholds is expected, which could affect how much people will pay in taxes.
Tax Rates 2026
Basic rate: 20%
Higher rate: 40%
Additional rate: 45%
Changes to Tax Thresholds and Allowances
In 2026, there will be adjustments to the thresholds that determine when individuals move into a higher tax band. Additionally, there will be changes to tax allowances, which may impact the amount of tax you pay.
Basic rate threshold: Remains unchanged for income below £50,000.
Higher rate threshold: Will be increased to £100,000, meaning more people will fall under the basic rate.
The increase in the higher rate threshold means more people will fall into a lower tax category.
How the Changes Will Affect Employers
Employers will need to account for the new tax thresholds and rates when calculating taxes and wages for their employees. This will directly impact the contributions they must make. There will also be changes to rules on employee benefits, such as meal vouchers and other perks.
Employers should regularly check for changes in legislation to ensure their calculations are compliant with the new rules.
Make sure your accounting systems are ready for changes that may affect employee tax calculations.
Tax Allowances and Exemptions Available for 2026
For 2026, several tax allowances will remain available to individuals, including relief for children, charitable donations, and other specific exemptions. These allow you to reduce your taxable income and pay lower taxes.
If you have children under the age of 16, you can claim tax relief of up to £2,500 per child, which can significantly reduce your tax burden.
Tips for Tax Planning in 2026
If you want to maximise your tax benefits in 2026, here are a few tips that can help:
Plan ahead: Consider using tax exemptions and reliefs that can reduce your taxable income.
Invest in pension funds: Contributions to pension schemes are tax-deductible and can help you save on taxes.
Stay updated: Tax laws can change, so it's important to stay informed about any updates.
A full overview of current tax thresholds and changes is available on official government websites.
Conclusion
The year 2026 brings significant changes to the UK’s tax system. It’s crucial to stay informed about changes in tax rates, thresholds, and allowances. Whether you're an employee or an employer, we recommend regularly consulting with tax experts to ensure your tax situation is optimal.
You can read more about UK VAT and its basic principles in our article: What is VAT and what’s it for?