Tax year 2025/26

The UK tax year runs from 6 April to 5 April. Budget headlines often blur “this year” and “next year”; payslips and Self Assessment do not. For 2025/26, most Income Tax thresholds are frozen while wages and prices still move — quietly pushing more people into higher bands. National Insurance shifted in 2024/25 and largely stabilised in 2025/26. Scotland tweaked bands again. Employer NI rose.

This guide summarises what applies in 2025/26, contrasts it with 2024/25 where helpful, explains fiscal drag, and shows how to use TaxBite with the correct year settings. Pair it with how take-home works for the calculation chain and tax codes for your 1257L (or S1257L) payslip instruction.

Calendar vs tax year — why April matters

Employers run payroll monthly but tax is assessed cumulatively from April. Your P60 at year end (by 31 May) covers 6 April–5 April. Self Assessment balancing payments for 2025/26 are due 31 January 2027. When someone says “2025 tax”, clarify whether they mean calendar 2025 or tax year 2025/26 — the numbers differ.

What stayed frozen in 2025/26

Several core figures are unchanged from 2024/25 (and some from earlier years):

• Personal allowance — £12,570 (frozen since 2021/22)
• Basic rate band upper limit (England/Wales/NI) — £50,270
• Higher rate threshold — £125,140 (where additional rate begins and allowance hits zero after taper)
• £100,000 taper start — allowance reduces £1 per £2 above £100k
• Employee NI upper earnings limit — £50,270 (aligned with higher-rate threshold)
• Primary NI threshold — £12,570 annually

Freezing looks harmless in a table. In practice, a 5% pay rise can push more income into 20%, 40%, or Scottish intermediate/higher bands without any “rate increase” headline. That is fiscal drag.

What changed in 2025/26

Employee National Insurance — 8% main rate holds

Employee NI in the main band is 8% on earnings £12,571–£50,270, with 2% above. The 8% rate arrived from April 2024 (cut from 12% then partially reversed). 2025/26 continues 8%/2% — no further employee NI cut this year. Official NI tables: gov.uk NI rates.

Employer National Insurance — up to 15%

From April 2025, employer NI is 15% on earnings above £5,000 (secondary threshold reduced from £9,100). This does not appear on your payslip but affects hiring, contractor rates, and total employment cost. TaxBite models employee NI only for take-home.

Scottish Income Tax bands — small shifts

Scotland sets bands annually. 2025/26 Scottish rates include starter 19%, basic 20%, intermediate 21%, higher 42%, advanced 45%, top 48% — with band limits adjusted. The structural story unchanged: middle earners pay more than England at the same gross. Details: gov.scot. Compare take-home: Scotland vs England guide.

Self-employed Class 4 NI — 6%/2%

Class 4 remains 6% on profits £12,570–£50,270 and 2% above. Class 2 abolished as a separate payment for most (treated as paid for NI record if profits ≥ £6,845). Self-employed NI guide.

Student loan thresholds — plan-specific

Plan 2 threshold £29,385, Plan 5 £25,000, Plan 1/4 £25,000, postgraduate £21,000 — check your plan on the Student Loans Company. Student loan guide.

England/Wales/NI Income Tax bands 2025/26

*Bands apply to taxable income after allowance; gross equivalents shown for intuition. Source: gov.uk.

Fiscal drag — the silent pay cut

Fiscal drag is when frozen tax thresholds pull more income into tax as earnings rise with inflation. Example: personal allowance stuck at £12,570 since 2021/22. If your salary rose from £45,000 to £52,000 over those years, more pounds sit above £50,270 (40% + 2% NI) even though “rates” did not change.

Worked illustration — two earners, same £50,000 salary in 2025/26 vs hypothetical indexed allowance:

• Actual 2025/26 — allowance £12,570 → tax on £37,430 at 20% = £7,486
• If allowance had risen ~£1,500 with inflation since 2021 — taxable £36,430 → tax £7,286 — about £200/year more tax from freeze alone at £50k
• At £60,000, freeze plus higher-rate exposure costs more — part of income taxed at 40% instead of 20% if band had indexed

Politicians call freezes “stability”. Payrolls call it higher PAYE. You call it “why is my rise only £150/month?” — pay rise guide has the marginal maths.

2024/25 vs 2025/26 — employee take-home snapshot

For a typical PAYE employee, 2025/26 is very close to 2024/25 on take-home — main NI rates already settled at 8%/2%. Differences are marginal unless Scottish bands or employer costs affect you:

The story for 2025/26 is not a new employee NI shock — it is frozen thresholds meeting rising wages and employer-side NI changes feeding compensation negotiations.

Who feels 2025/26 hardest

• £50k–£60k earners — hovering at higher-rate boundary; small rise → 42% marginal
• Scottish £40k–£75k — intermediate and 42% bands vs England 20%/40%
• £100k–£125k — allowance taper creates 60%+ effective rates — £100k guide
• New starters — emergency tax unrelated to year change but hits every April job movers — emergency tax
• Sole traders — Class 4 on profits; payments on account deadlines unchanged in spirit

Worked example: £52,000 salary in 2025/26

Just above the frozen higher-rate threshold:

• Taxable: £52,000 − £12,570 = £39,430
• Basic band tax: 20% × £37,700 = £7,540
• Higher band tax: 40% × (£39,430 − £37,700) = 40% × £1,730 = £692
• Total Income Tax: £8,232
• NI: 8% × £37,700 + 2% × (£52,000 − £50,270) = £3,016 + £34.60 ≈ £3,151
• Take-home: ~£40,617/year (~£3,385/month)

Compare £50,000 take-home ~£39,520 — the extra £2,000 salary keeps only about £1,097 (~55% marginal once higher rate + 2% NI bite).

Worked example: Scottish £50,000 in 2025/26

• Income Tax ≈ £9,016 (multi-band Scottish calculation)
• NI ≈ £2,994 (same as England)
• Take-home ≈ £37,990/year (~£3,166/month)
• vs England ~£39,520 — about £127/month less

Tax codes in 2025/26 — still 1257L for most

Standard code 1257L reflects £12,570 allowance. Scottish employees: S1257L. Codes update when benefits, underpaid tax, or multiple jobs shift allowance. A frozen allowance means the numeric code has been stable for years — easier to spot when something else appears. Tax codes guide.

Key dates for 2025/26

• 6 April 2025 — tax year starts; new codes applied
• Monthly payroll — cumulative PAYE from month 1
• 5 April 2026 — tax year ends
• 31 May 2026 — P60 issued by employers
• 31 January 2027 — Self Assessment and balancing payment deadline for 2025/26
• 31 July 2026 — second payment on account (Self Assessment)

How to use TaxBite for 2025/26

TaxBite defaults to 2025/26 rates: personal allowance £12,570 with taper, England or Scotland bands, employee NI 8%/2%, Class 4 6%/2%, student loan thresholds above, tax code overrides.

1. Open the calculator — confirm tax year shows 2025/26 if selector visible
2. Enter annual gross salary or profit
3. Select region — England vs Scotland changes Income Tax only
4. Add pension %, student loan plan, employment type as needed
5. Use Advanced tax code field to model BR/D0 scenarios
6. Cross-check single salary on salary tables — e.g. £50k, £75k

TaxBite is an annual model — smooth monthly average. Your payslip uses cumulative PAYE; first and last months of the year may differ slightly. See reading a payslip.

Planning moves in 2025/26

Not tax advice — but common levers people model in TaxBite before speaking to an accountant:

• Pension sacrifice — reduces tax and NI on contributions — guide
• Charitable Gift Aid — can extend basic rate band (not modelled in TaxBite)
• Salary near £100k — pension to reduce adjusted net income below taper — guide
• Marriage Allowance — transfer unused allowance if eligible — check gov.uk

What TaxBite does not cover for 2025/26

Capital gains, dividend tax, corporation tax, VAT, property income, benefits-in-kind, child benefit high-income charge, and multiple employments with complex allowance splits. For those, HMRC or a qualified adviser — the calculator is PAYE take-home focused.

Budget context — why so much stayed frozen

Chancellors have repeatedly extended the freeze on personal allowance and basic/higher-rate thresholds to raise revenue without announcing headline rate rises. For employees, the effect is gradual: each pay review that nudges you toward £50,270 or £100,000 has outsized impact because the goalposts are fixed while living costs move. Understanding 2025/26 as a “stable rates” year is accurate for NI and headline Income Tax percentages — but misleading if you ignore threshold freeze as a policy choice.

Self-employed sole traders feel the same Income Tax freeze on profits plus Class 4 NI on identical profit bands. Limited company directors sit outside TaxBite’s default path — salary plus dividends follow different rules entirely.

Worked example: £40,000 salary — the “basic rate only” comfort zone

At £40,000 gross in England with 1257L, no pension, no loan:

• Taxable income: £40,000 − £12,570 = £27,430
• Income Tax: 20% × £27,430 = £5,486
• Employee NI: 8% × (£40,000 − £12,570) = £2,194
• Take-home: £32,320/year (~£2,693/month)

Marginal rate on the next £1,000 raise: 28% (20% tax + 8% NI) until higher rate approaches. This is the band where pay rises feel most linear — until you approach £50k.

Worked example: £100,000 salary — taper in action

At exactly £100,000, personal allowance begins tapering. Allowance reduction: (£100,000 − £100,000) ÷ 2 = £0 — still full £12,570 at the threshold. At £110,000:

• Allowance reduced by (£110,000 − £100,000) ÷ 2 = £5,000 → allowance £7,570
• Extra tax vs full allowance: 40% × £5,000 lost allowance = £2,000 on top of normal higher-rate stack
• Effective marginal rate on £100k–£125k slice often quoted near 60% — see £100k guide

TaxBite applies taper automatically above £100k. Your tax code may lag until HMRC updates mid-year.

Pension auto-enrolment and 2025/26

Minimum employer/employee pension contributions under auto-enrolment continue — typically 3% employee, 5% employer on qualifying earnings (with thresholds). Salary sacrifice above minimum can further reduce tax and NI; the 2025/26 freeze makes sacrifice slightly more valuable in higher bands because saved tax is still 20%/40%/Scottish equivalents. Model 5% sacrifice on £50k in TaxBite or read pension sacrifice guide.

Reading the tax year on documents

Your P45 shows tax year to date when you leave. P60 summarises full-year tax and NI. P11D lists benefits affecting next year’s code. Matching these to TaxBite’s annual output helps spot code drift before April surprises.

Model 2025/26 take-home

How take-home works → · Tax codes → · Scotland vs England →

Estimates only — not tax advice. Budget announcements can change mid-year; verify on gov.uk rates and allowances before major decisions.