Income Tax Thresholds

As previously announced, income tax and NIC thresholds will be frozen and will remain at their current levels until April 2030.

The tax-free personal allowance will therefore remain at £12,570 with basic rate tax being triggered above this level. Higher rate tax will kick in at £50,270 and additional rate tax will be levied from £125,140. The tapering of the personal allowance between £100,000 and £125,140 also remains untouched.

A new announcement today was in relation to a new “pension tax allowance”, which seeks to increase the £12,570 personal allowance slightly from April 2027 for those over state pension age. The pension tax allowance will increase the personal allowance to a maximum of £13,037 (ie. £467 extra, saving a maximum of £94 tax) which is the new level of the full state pension. Those with total income over this amount will have the additional allowance reduced on a £1 for £3 of income basis, so those with income over £13,319 will not benefit at all.

The “trading allowance” for trading and miscellaneous income will also be increased from £1,000 to £3,000 from April 2027.

Income Tax Rates

The standard 20% basic rate, 40% higher rate and 45% additional rates of tax have not been changed for earned/pension income.

Most dividend income has already been increased by 2% from April 2026 so that remains untouched this time around.

The tax charged on property and savings income was announced last year that from April 2027 there would be a 2% increase across the board, therefore creating a 22% basic rate, 42% higher rate and a 47% additional rate. Today it was announced that they will go a step further than this and actually increase these rates by 4% from April 2027 therefore creating a 24% basic rate, 44% higher rate and a 49% additional rate.

National Insurance Contributions (NIC)

NIC thresholds were largely untouched, however the class 1 NIC lower earnings limit and the class 2 NIC small profits threshold were increased by inflation to £6,916 and £7,355 respectively.

Weekly amounts payable for class 2 NIC and class 3 NIC were also increased by inflation to £3.80pw and £19.05pw respectively.

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