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
| Allowance | 2025/26 | 2024/25 | Notes |
|---|---|---|---|
| Personal Allowance | £12,570 | £12,570 | Reduced after £100,000 income |
| Marriage Allowance transfer | £1,260 | £1,260 | If one spouse earns below PA |
| Blind Person’s Allowance | £3,130 | £3,070 | Transferable if unused |
| Trading Allowance | £1,000 | £1,000 | For small sole trader income |
| Property Allowance | £1,000 | £1,000 | For small rental income |
What Are UK Tax Bands?
England, Wales & Northern Ireland
| Tax Band | Tax Rate | Income Range (2024/25 & 2025/26) |
|---|---|---|
| Basic rate | 20% | £12,571 – £50,270 |
| Higher rate | 40% | £50,271 – £125,140 |
| Additional rate | 45% | Over £125,140 |
Scotland
Scotland sets its own rates:
| Band | Rate | 2025/26 Thresholds | 2024/25 Thresholds |
|---|---|---|---|
| Starter | 19% | £12,571 – £15,397 | £12,571 – £14,876 |
| Basic | 20% | £15,398 – £27,491 | £14,877 – £26,561 |
| Intermediate | 21% | £27,492 – £43,662 | £26,562 – £43,662 |
| Higher | 42% | £43,663 – £75,000 | £43,663 – £75,000 |
| Advanced | 45% | £75,001 – £125,140 | £75,001 – £125,140 |
| Top | 48% | Over £125,140 | Over £125,140 |
Dividend Tax
| Taxpayer Type | Rate | Allowance |
|---|---|---|
| Basic rate | 8.75% | £500 tax-free dividend allowance |
| Higher rate | 33.75% | |
| Additional rate | 39.35% |
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)
| Threshold | 2025/26 | 2024/25 |
|---|---|---|
| Lower Earnings Limit | £6,500 | £6,396 |
| Primary Threshold | £12,570 | £12,570 |
| Upper Earnings Limit | £50,270 | £50,270 |
| NIC Rates | 8% (to UEL), 2% (above UEL) | 8% (to UEL), 2% (above UEL) |
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)
| Taxpayer | Gains from Property | Gains from Other Assets | Annual Exemption |
|---|---|---|---|
| Basic rate | 18% | 10% (18% from Oct 2024) | £3,000 |
| Higher rate | 28% | 20% (24% from Oct 2024) | £3,000 |
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?
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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Looking for dependable accountancy service in Manchester? Call us on 0161 706 1847 or email us at info@adenaaccountancy.co.uk to focus on growth and leave the rest to us.
