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UK tax in 2026/27: rates, allowances and deadlines
Income Tax, Capital Gains Tax, Making Tax Digital, the £100,000 Personal Allowance taper and Inheritance Tax on business and farm property are the five topics below. Figures come from GOV.UK and legislation.gov.uk.
For 2026/27, the Personal Allowance is £12,570 and the Capital Gains Tax annual exempt amount is £3,000. The tax year runs from 6 April 2026 to 5 April 2027. Making Tax Digital for Income Tax started on 6 April 2026 for sole traders and landlords with qualifying income over £50,000.
The Personal Allowance and the basic rate limit are fixed in law for every tax year up to and including 2030/31. If pay rises while those limits stay the same, more of your income falls into the 40% band.
Three areas need attention in 2026/27: Making Tax Digital for Income Tax, the £3,000 Capital Gains Tax annual exempt amount and the £2.5 million cap on 100% Business Relief and Agricultural Relief.
Income Tax: rates and thresholds for 2026/27
The Personal Allowance for 2026/27 is £12,570. The allowance and the basic rate limit of £37,700 are fixed in law for every tax year from 2022/23 to 2030/31. If your pay rises while the limits stay put, more of it can be taxed at 40%, which applies above £50,270.
| Income Band | Taxable Income | Tax Rate |
|---|---|---|
| Personal Allowance | £0 to £12,570 | 0% tax-free |
| Basic Rate | £12,571 to £50,270 | 20% |
| Higher Rate | £50,271 to £125,140 | 40% |
| Additional Rate | Over £125,140 | 45% |
These bands apply if you do not live in Scotland. Your Personal Allowance falls by £1 for every £2 of adjusted net income above £100,000 and is nil at £125,140.
Scottish Income Tax (2026/27)
Scotland has six bands above the Personal Allowance, with rates of 19%, 20%, 21%, 42%, 45% and 48%. The 42% higher rate starts at £43,663, the 45% advanced rate at £75,001 and the 48% rate above £125,140.
Capital Gains Tax: the £3,000 annual exempt amount
The annual exempt amount is £3,000 for individuals in 2026/27. It was £12,300 in 2022/23 and £6,000 in 2023/24. From 6 April 2026 gains are taxed at 18% within your unused basic rate band and 24% above it. Higher and additional rate taxpayers pay 24%.
Bed and ISA
With a Bed and ISA you sell investments, pay the money into a stocks and shares ISA (the limit is £20,000 in 2026/27) and buy them back inside the ISA. The £3,000 annual exempt amount can cover the gain on the sale, and there is no tax on income or gains from the investments once they are in the ISA.
Making Tax Digital for Income Tax
Making Tax Digital for Income Tax started on 6 April 2026 for sole traders and landlords whose qualifying income from self-employment and property was over £50,000 in 2024/25. The limit falls to £30,000 (based on 2025/26) from 6 April 2027 and £20,000 (based on 2026/27) from 6 April 2028.
Quarterly update deadlines for 2026/27
There is no penalty for missing a quarterly update deadline in 2026/27, but you still need to keep digital records and send the updates before you submit your tax return. You need compatible software. From 2027/28 each missed quarterly update or tax return deadline earns a penalty point, and 4 points bring a £200 penalty.
Tax planning: the £100,000 Personal Allowance taper
Between £100,000 and £125,140 of adjusted net income your Personal Allowance falls by £1 for every £2. Each extra £100 of income costs £60 in Income Tax: £40 at the 40% rate and £20 because you lose £50 of allowance, an effective rate of 60%.
How the effective rate reaches 71%
Add 2% employee National Insurance and a 9% student loan repayment and the total reaches 71%. From each extra £100 you keep £29.
How to reduce it
A pension contribution or a Gift Aid donation lowers your adjusted net income. Every £2 you take off income below £125,140 restores £1 of Personal Allowance. Reducing adjusted net income from £120,000 to £100,000 saves £12,000 in Income Tax.
Inheritance Tax: Business Relief and Agricultural Relief
For deaths on or after 6 April 2026, 100% Business Relief and Agricultural Relief on qualifying property is capped at £2.5 million in total. Qualifying property above the cap gets 50% relief.
The standard Inheritance Tax rate is 40%. With 50% relief, half of the value above the cap is taxable, so the effective rate on that slice is 20%. On £3 million of qualifying property, £250,000 of the £500,000 above the cap is taxable, which gives £100,000 of tax. This ignores other reliefs and allowances. Unused allowance from a spouse or civil partner can be transferred, which can make the allowance up to £5 million.
Topic guides
Guides for each tax topic, updated for 2026/27.
Income Tax guide
The Personal Allowance taper, tax codes, Marriage Allowance and Scottish rates.
Income TaxCapital Gains Tax and investment planning
The £3,000 annual exempt amount, Bed and ISA, and reporting UK property sales.
Capital Gains TaxMaking Tax Digital guide
Making Tax Digital, quarterly updates and compatible software.
HMRC Rules & ComplianceInheritance Tax and estate planning
Business Relief, Agricultural Relief and the £2.5 million allowance.
Planning & StrategiesTax calculators
Estimates for the 2026/27 tax year, including the 60% tax trap and take-home pay.
Calculators & ToolsPrimary sources
- Income Tax rates and Personal Allowances
- Income Tax in Scotland
- Capital Gains Tax rates and allowances
- Report and pay your Capital Gains Tax
- When you need to use Making Tax Digital for Income Tax
- Penalties for Making Tax Digital for Income Tax
- Business Relief for Inheritance Tax
- Claim tax relief for your job expenses
- Finance Act 2021, section 5
- Finance Act 2026, section 10
Frequently asked questions
Answers to common questions about UK tax in 2026/27.
Making Tax Digital
I rent out property and my income was £52,000. Do I have to use Making Tax Digital?
If your qualifying income from self-employment and property was over £50,000 on your 2024/25 tax return, you should have started using Making Tax Digital for Income Tax on 6 April 2026. You keep digital records and send quarterly updates through compatible software. HMRC writes to people it identifies, but checking is still your responsibility.
What happens if I miss a quarterly update deadline?
In 2026/27 there is no penalty for missing a quarterly update deadline, but you still need to send the updates before you submit your tax return. From 2027/28 each missed quarterly update or tax return deadline earns a penalty point. At 4 points you get a £200 penalty, and another £200 for each further missed deadline.
Income Tax
Why is my take-home pay lower after a pay rise?
The Personal Allowance of £12,570 and the basic rate limit of £37,700 are fixed in law up to and including 2030/31. If your pay rises while those limits stay the same, more of it is taxed at 40% above £50,270 instead of 20%. For example, £4,730 above £50,270 costs £946 more tax.
I live in Scotland but work for a London company. Which rates apply?
GOV.UK says you pay Scottish Income Tax if you live in Scotland. It applies to your wages, pension and most other taxable income. For 2026/27 the rates are 19%, 20%, 21%, 42%, 45% and 48% across six bands above the Personal Allowance. Your tax code starts with S.
Higher earners and planning
What is the 60% tax trap, and how can I reduce it?
Between £100,000 and £125,140 of adjusted net income, your Personal Allowance falls by £1 for every £2, so each extra £100 costs £60 in Income Tax. A pension contribution or a Gift Aid donation lowers your adjusted net income. Reducing it from £120,000 to £100,000 saves £12,000 in Income Tax.
Property, assets and gains
I sold a second home. When do I report and pay the tax?
You must report and pay any Capital Gains Tax due on UK residential property within 60 days of completing the sale, using a Capital Gains Tax on UK property account. If you file Self Assessment, include the sale on your tax return as well. Reporting late can bring a £100 penalty, more penalties as time passes, and interest.
What is the Capital Gains Tax allowance for 2026/27?
The annual exempt amount is £3,000 for individuals in 2026/27 and £1,500 for most trustees. Gains are taxed at 18% within your unused basic rate band and 24% above it. If you file Self Assessment, you report disposals when you sold assets worth more than £50,000 or your gains before losses were over £3,000.
Employment
Can I claim tax relief for working from home in 2026/27?
No. GOV.UK says that from 6 April 2026 to 5 April 2027 you cannot claim tax relief for working from home. You can still claim for the 4 previous tax years if your job required you to work from home, either £6 a week or the exact extra cost you can show.
Check your own position
Check your tax code, your adjusted net income if you earn near £100,000, whether Making Tax Digital applies to you, and the 60-day deadline if you sell UK residential property. The 2026/27 tax year ends on 5 April 2027.
TaxYZ provides educational information only and is not regulated by the FCA or ICAEW. This page does not constitute tax, legal or financial advice. Consult a qualified professional before acting on any information contained here.