The tax system in the UK is one of the most complex ones.
Tax bands, allowances, and relief schemes all affect how you pay your taxes.
These allowances and tax rates can change yearly, with a budget announcement before each new tax year.
The recent budget announcement covers changes to business and personal taxes.
Here is the guide explaining all the UK tax rates, tax thresholds, allowances, and bands for the tax years 2024-25 and 2025-26.
This blog post is divided into the following sections
- The tax-free Personal Allowance
- The National Minimum Wage (NMW)
- National Living Wage (NLW)
- National Insurance
- Income Tax
- Capital Gains Tax
- VAT registration threshold
The tax-free personal allowance
A tax-free personal tax allowance is how much income you can earn before you start paying income tax on your income.
In 2024-25, the personal allowance was £12,570, the same for the tax year 2025-26, running from 6 April 2025 to 5 April 2026.
Let’s say your income is £20,000 per year; you will only pay income tax on anything above £12,570. £20,000 – £12,570 = £7,430. Your taxable income would be £7,430.
What is the personal allowance for high earners?
For higher earners, for every £2 that they earn above £100,000, their Allowance is reduced by £1.
Let’s say if you are earning £125,140 or more; then your Allowance is 0.
The National Minimum Wage (NMW)
Several rules cover the basic minimum wage, which employers must pay to their staff.
The National Minimum Wage (NMV) is determined based on the employee’s age, yet there are different rates for apprentices.
In 2025-26, the age thresholds and the hourly rate mentioned in the table below also changed.
| National Minimum Wage in 2024-25 | National Minimum Wage in 2025-26 |
| £11.44 per hour (employees over 21) | £12.21 per hour (employees over 21) |
| £8.60 (aged 18 – 20) | £10.00 (aged 18 – 20) |
| £6.40 per hour (Under 18) | £7.55 per hour (Under 18) |
| £6.40 per hour (Apprentices) | £7.55 per hour (Apprentices) |
Source: Gov.uk
National Living Wage (NLW)
For the year 2024-25, the National living wage is £11.44 per hour and £12.21 for 2025-26.
The age threshold for the NLW is lower for the 2023-24 tax year than in the previous year.
National Insurance
The rate of National Insurance contributions (NIC) you pay depends on whether you are an employee, an employer, or self-employed.
These different categories are called ‘classes’; different NIC classes have their thresholds and rates to avoid confusion.
Depending on your income, you might also pay more than one type of National Insurance (NI).
For instance, you might pay NIC on your income and the Employer’s NIC for the people who work for you.
Or, if you work for yourself and are employed, you’ll pay different types (and rates) of NIC on the money you earn from your employer and your own business.
Paying the right amount of NICs is important, as it can count towards eligibility for some benefits or the state pension.
Employees pay Class 1 – primary National Insurance
Where eligible, employees have Class 1 NI deducted from their pay by their employer, who then pays it to HMRC on their behalf through PAYE.
Class 1 National Insurance thresholds and rates for employees 2024-25 and 2025-26 are below.
| Weekly Threshold 2024-25 | Annual Threshold 2025-26 | Weekly Threshold 2024-25 | Annual Threshold 2025-26 | |
| Lower Earnings Limit (LEL) Employees earning less than this limit won’t incur NI but won’t accrue NI benefits, such as qualifying payments towards their State Pension. | £123 | £6,396 | £125 | £6,500 |
| Primary Threshold This is the point at which employees start paying NI. Earning below this but above the Lower Earnings Limit still doesn’t incur NI, but employees will earn NI ‘credits’ and accrue NI benefits. | £242 | £12,570 | £242 | £9,500 |
| Upper Earnings Limit (UEL) Earnings above the Primary Threshold up to & including the Upper Earnings Limit incur NI at 8% | £967 | £50,270 | £967 | £50,270 |
| Earnings above the Upper Earnings Limit: incur NI at 2% | £968 upwards | £50,271 upwards | £968 upwards | £50,001 upwards |
Employers pay Class 1 – Secondary National Insurance
As well as deducting and paying NI from employees’ pay on their behalf, employers also make National Insurance Contributions (NICs).
Essentially the employee’s NI has two parts; their own contribution and their employers.
This is still Class 1 NI, though the employer’s contribution is known as Class 1 secondary NI (the employee’s contribution is ‘primary’).
This means that the cost of hiring someone is more than just paying their wages; there’s employer NI to think about too.
Class 1 – secondary National Insurance thresholds and rates for employers 2024-25 and 2025-26 are as below
| Weekly Threshold 2024-25 | Annual Threshold 2024-25 | Weekly Threshold 2025-26 | Annual Threshold 2025-26 | |
| Secondary Threshold: Employers pay NICs at a rate of 15% (2024-25: 13.8%) on salary payments above this threshold. | £175 | £9,100 | £96 | £5,000 |
Class 1A or 1B National Insurance
Class 1A and 1B NI are contributions employers might also pay to HMRC in other instances, such as the equivalent financial value of any expenses or work benefits (sometimes known as Benefits in Kind or BiKs) to employees.
The rate of employer pay class 1A and 1B NICs is 15% (2024-25: 13.8%) for 2025-26.
National Insurance & the Employment Allowance
Eligible employers can receive relief to cover the costs of employers’ National Insurance by claiming the Employment Allowance. For 2025-26 the allowance is £10,500, increased from £5,000 for 2024-25.
To be eligible for the Employment Allowance, employers must have at least 1 employee or 2 directors on the payroll. The directors can’t already be claiming it through another company.
Self-employed people pay Class 2 and-or Class 4 National Insurance
Self-employed workers might pay both Class 2 and Class 4 NI, depending on how much they earn from their self-employed work. If you’re a self-employed person, your National Insurance contribution will be worked out as part of your Self Assessment tax return.
If you are both employed and self-employed;
- You usually pay NI on your self-employed income as part of your Self Assessment.
- Your employer will deduct the employee’s NI from your salary.
| NI threshold limit 2024-25 | NI threshold limit 2025-26 | |
| No NI incurred on self-employed income in this bracket, but you can make voluntary contributions to fill any gaps in your NI record. | £0 – £6,725 | £0 – £6,845 |
| Small Profits Threshold (SPT): You’ll pay No Class 2 NI on self-employed income above this threshold up to the Lower Profits Limit (LPL). | £12,570 | £12,570 |
| Lower Profits Limit (LPL): Self-employed income above this threshold and up to the Upper Profits Limit incurs Class 4 NI at a rate of 6% | £12,570 | £12,570 |
| Upper Profits Limit (UPL): Self-employed income above this threshold incurs Class 4 NI at a rate of 2% | £50,270 | £50,270 |
Income Tax
The income tax you pay to HMRC depends on how much and how you earn the money.
Let’s imagine the income tax system as a stack of blocks.
Here, each block or tax band represents an income range, and you pay tax as a percentage of what you earn within that particular block or tax band.
As your income increases, your tax rate only applies to a proportion of the income that falls within that band.
The table below shows the income tax rates and thresholds.
| Tax band | Thresholds for 2024-25 | Thresholds for 2025-26 |
| Personal allowance – This is the income you can earn before you pay income tax. Zero tax on this income. | £0 – £12,570 | £0 – £12,570 |
| Basic rate income tax – 20% tax on the proportion of income which falls into the basic rate tax bracket. | £12,571 – £50,270 | £12,501 – £50,270 |
| Higher rate income tax – 40% tax on the proportion of income which falls into the higher rate tax bracket. | £50,271 – £125,140 | £50,001 – £125,140 |
| Additional rate income tax – the highest rate. 45% tax on the proportion of income falling into the additional rate tax bracket. | £125,140 upwards | £125,140 upwards |
If your income is £60,000 in the 2025-26 tax year, you will pay:
- 0% tax on the first £12,570
- 20% tax on the part of your income in the next tax bracket (£12,571 up to £50,270), which means you will pay 20% tax on £37,700.
- 40% tax on the next chunk (£50,271 up to £60,000), so you will pay 40% tax on £9,730.
Capital Gains Tax
Capital Gains Tax (CGT) is payable on any profit you make after ‘disposing’ of an asset you own. The amount of CGT you owe is worked out on the gain you’ve made, not on the total amount of money you made from disposing of the asset.
Disposing of an asset usually means selling it, but it can also include giving it away to someone, swapping it for something else, or compensating for its loss in other ways.
The annual exemption from Capital Gains Tax in 2024-25 and 2025-26
You won’t pay Capital Gains Tax (CGT) on gains you make under the annual exemption threshold. In 2025-26, this remains unchanged from the previous year, at £3,000.
You’ll start paying CGT on gains you make above this threshold; the rate you pay depends on what the gain results from (in other words, what you disposed of) and what income tax rate you pay.
CGT if you pay the basic rate of income tax
| Capital Gains Tax 2024-25 | Capital Gains Tax 2025-26 | |
| Gains from other residential property | 18% | 18% |
| Gains from other chargeable assets | 10%* | 18% |
The rate changed to 18% from 30 October 2024 in the 2024/25 tax year.
CGT if you pay the higher rate of income tax
| Capital Gains Tax 2024-25 | Capital Gains Tax 2025-26 | |
| Gains from other residential property | 24% | 28% |
| Gains from other chargeable assets ** (The rate changed to 18% from 30 October 2024 in the 2024/25 tax year.) | 20%** | 24% |
Corporation Tax
Limited companies pay Corporation Tax on profits made by doing business, selling assets for more than they cost, or through investments.
The tax depends on how much profit the company makes.
- Profits up to £50,000 are taxed at 19%
- Profits between £50,000 and 250,000 are taxed at 26.5%
- Profits over 250,000 are taxed at 25%
VAT registration threshold
If your revenue reaches the VAT registration threshold, you must register for VAT. The threshold remains at £90,000.
VAT rates in 2024-25 and 2025-26
| VAT rate 2024-25 | VAT rate 2025-26 | |
| Standard rate: The rate of VAT that applies to most goods & services. | 20% | 20% |
| Reduced rate: The lower rate applicable to certain goods & services, such as electricity and gas. | 5% | 5% |
| Zero rates: Applied to some goods & services, such as food or children’s clothing. | 0% | 0% |
