Understanding UK tax bands and rates is essential for anyone earning income in the UK—whether you are employed, self-employed, or running a business. Knowing how much tax you owe helps you plan your finances, avoid surprises, and stay compliant with HMRC.

In this guide, we break down the UK income tax system, tax bands, rates, and how your earnings are taxed in simple terms

Tax in the UK can feel complicated – different rates, thresholds, and allowances apply depending on where you live, how you earn, and whether you’re employed, self-employed, or run a company. At Adena Accountancy, we make it easier. Here’s our guide to the key UK tax bands, rates, allowances, and changes for the 2024/25 and 2025/26 tax years – and what they mean for you.

Personal Allowance

The Personal Allowance is the amount of income you can earn before you start paying Income Tax.

• • 2024/25 and 2025/26 → £12,570

• • Reduced once income exceeds £100,000 (lost completely at £125,140)

• • Can be increased if you qualify for Marriage Allowance or Blind Person’s Allowance

What this means for you

• • Employees: automatically applied via PAYE.

• • Self-employed: applied when HMRC calculates your Self Assessment.

• • Company directors: usually managed through payroll software – we help our clients optimise salary/dividend combinations to make the most of allowances.

Key Personal Allowances

What Are UK Tax Bands?

England, Wales & Northern Ireland

Scotland

Scotland sets its own rates:

Dividend Tax

Why it matters: Many limited company directors use a mix of salary and dividends to keep tax efficient. We help structure this correctly.

National Insurance Contributions (NICs)

Employees (Class 1)

Employers

• • 2025/26: NICs at 15% above £5,000

• • 2024/25: NICs at 13.8% above £9,100

Self-employed (Class 2 & 4)

• • Class 2 NICs abolished (£0 per week from 2024/25 onwards)

• • Class 4 NICs: 6% between £12,570 – £50,270, then 2% above

Capital Gains Tax (CGT)

Tip: Business Asset Disposal Relief can reduce CGT to 10% (lifetime limit £1m).

Company Taxes

• • Corporation Tax: 19%–25% depending on profits (both years)

• • VAT Registration Threshold: £90,000 (both years)

• • VAT Deregistration Threshold: £88,000 (both years)

Mileage allowances:

• • Car/van: 45p (first 10,000 miles), 25p (after)

• • Motorcycle: 24p | Bicycle: 20p

What this means for you

Tax planning can make a huge difference:

• • Sole traders → Use trading allowance if income is small; consider incorporation when profits rise.

• • Company directors → Optimise salary + dividends, and claim all allowable expenses.

• • Employers → NIC increases mean payroll planning is more important than ever.

At Adena Accountancy, we’ll make sure you don’t miss allowances, and help you structure your business in the most tax-efficient way.

Need help with tax planning?

Get in touch with our superhero accountants today – we’ll keep your taxes sorted, stress-free, and as efficient as possible.

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