In this blog, we have prepared a summary about the changes for the 2025/26 Tax Year.
The National Minimum Wage
Will increase from the 1st April 2025 as follows:
| Category of worker | Hourly rate |
|---|---|
| Aged 21 and above (national living wage rate) | £12.21 |
| Aged 18 to 20 inclusive | £10.00 |
| Aged under 18 (but above compulsory school leaving age) | £7.55 |
Tax Thresholds, Rates and Codes
The standard employee personal allowance for the 2025 to 2026 tax year is:
- £242 per week
- £1,048 per month
- £12,570 per year
England, Wales and Northern Ireland
| PAYE tax rate | Rate of tax | Annual earnings the rate applies to (above the PAYE threshold) |
|---|---|---|
| Personal allowance | 0% | Up to £12,570 |
| Basic tax rate | 20% | From £12,571 to £50,270 |
| Higher tax rate | 40% | From £50,271 to £125,140 |
| Additional tax rate | 45% | Above £125,140 |
Scotland
| PAYE tax rate | Rate of tax | Annual earnings the rate applies to (above the PAYE threshold) |
|---|---|---|
| Personal allowance | 0% | Up to £12,570 |
| Starter tax rate | 19% | From £12,571 to £15,397 |
| Basic tax rate | 20% | From £15,398 to £27,491 |
| Intermediate tax rate | 21% | From £27,492 to £43,662 |
| Higher tax rate | 42% | From £43,663 to £75,000 |
| Top tax rate | 48% | Above £125,140 |
Class 1 National Insurance Thresholds
| Description | Rate | Range |
|---|---|---|
| Employee NI Contribution | 0% | Up to £1,048 per month |
| 8% | From £1,049 to £4,189 per month | |
| 2% | Above £4,189 per month | |
| Employer NI Contribution | 0% | Up to £417 per month |
| 15% | From £417 per month |
Employment Allowance
Allows employers to reduce their annual National Insurance liability by up to the annual allowance amount if the total employers’ Class 1 National Insurance liabilities is less than £100,000 and there are at least one more Employee or paid Director on payroll apart from the sole Director.
Allowance: £10,500 for 2025 to 2026.
Self-employed: Class 2 and Class 4 National Insurance
Class 2 contributions are how the self-employed build up entitlement to the state pension. For 2025/26, Class 2 contributions are payable voluntarily at £3.50 per week where profits are below £6,845 per year.
Where profits exceed £6,845 per year the Class 2 contributions are automatically added and are not payable anymore.
The self-employed also pay Class 4 contributions on their profits. These contributions do not secure any benefit entitlement and are more akin to a tax. For 2025/26, Class 4 contributions are payable at the main rate of 6% where profits are between £12,570 and £50,270, and at the additional Class 4 rate of 2% on profits above £50,270 per year.
Both the Class 2 and Class 4 National Insurance are payable once in the year with the annual tax liability included in the Self Assessment Tax Return for 2025/26.
Dividend Tax Rates in 2025/26
This year the dividend tax rates are:
- 0% on the first £500 from dividends (this is called the Dividend Allowance)
- 0% if your total income is under the Personal Allowance (£12,570)
- 8.75% if you’re a basic rate taxpayer (up to £50,270 combined income)
- 33.75% if you’re a higher rate taxpayer (only for the part that goes over the £50,270 limit)
- 39.35% if you’re an additional rate taxpayer (above £125,140 – at this point you also lose your Personal Allowance as the income is over £100,000)
VAT Registration Threshold
You must register to VAT if:
- Your total VAT taxable turnover for the last 12 months was over £90,000 (the VAT threshold)
- You expect your turnover to go over £90,000 in the next 30 days
