The 2025/26 tax year began on 6 April 2025. Here are the most significant changes and what they could mean for your financial planning.
Frozen Income Tax Thresholds
Income tax thresholds remain frozen for 2025/26. The Personal Allowance stays at £12,570, and the higher rate threshold remains at £50,270. Because wages tend to rise with inflation while thresholds stay the same, more people are being pulled into higher tax bands each year — a process known as "fiscal drag."
If you received a pay rise, it is worth checking whether you have crossed into a higher tax band and considering whether pension contributions or other tax-efficient actions might be beneficial.
Pension Annual Allowance
The pension annual allowance remains at £60,000 for 2025/26. The money purchase annual allowance (MPAA) — which applies if you have flexibly accessed your pension — stays at £10,000.
If you have unused allowance from previous years, remember that you can carry forward up to three years of unused allowance.
Capital Gains Tax
The CGT annual exempt amount remains at £3,000 for 2025/26. CGT rates for disposals made from 30 October 2024 onwards are:
- 18% (basic rate) and 24% (higher rate) for most assets
- 18% (basic rate) and 24% (higher rate) for residential property (previously 18%/28%)
The reduction in higher-rate residential property CGT from 28% to 24% was introduced in the Autumn Budget 2024.
ISA Allowance
The ISA annual allowance remains at £20,000. The Junior ISA allowance stays at £9,000, and the Lifetime ISA limit remains at £4,000 (counting towards the £20,000 total).
National Insurance
Employee National Insurance contributions remain at 8% on earnings between £12,570 and £50,270, and 2% above that. Employer NI increased to 15% from April 2025 (up from 13.8%), with the employer threshold reduced to £5,000 — a significant increase in employment costs for businesses.
State Pension
The full new State Pension increased to £230.25 per week (£11,973 per year) under the triple lock. This represents a 4.1% increase from the previous year.
Inheritance Tax Changes
The nil-rate band remains frozen at £325,000 and the residence nil-rate band at £175,000. From April 2027, inherited defined contribution pensions will be brought into the scope of IHT — a significant change for estate planning. Agricultural Property Relief and Business Property Relief will also be reformed from April 2026.
Important: This article is for general educational purposes only and does not constitute financial advice. Tax rules can change and individual circumstances vary. If you need advice tailored to your situation, please consult a qualified, FCA-regulated financial adviser. You can browse advisers in our adviser directory.