Last updated: July 2026 · Tax year: 2026/27
⚠ Tax rules change at each Budget. These figures reflect the 2026/27 UK tax year (6 April 2026 – 5 April 2027).
Always confirm rates with a qualified accountant before making decisions. Nothing here is professional tax or legal advice.
1. Key Tax Rates & Thresholds (2026/27)
Income Tax — England, Wales & Northern Ireland
| Band | Income range | Rate |
|---|
| Personal allowance | Up to £12,570 | 0% Frozen to 2031 |
| Basic rate | £12,571 – £50,270 | 20% |
| Higher rate | £50,271 – £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
Scotland has separate rates — see gov.uk/scottish-rate-income-tax.
The personal allowance tapers to zero above £125,140.
Dividends
| Item | 2026/27 figure | Previous |
|---|
| Dividend allowance (tax-free) | £500 | £1,000 |
| Basic rate | 10.75% ↑ Changed Apr 2026 | 8.75% |
| Higher rate | 35.75% ↑ Changed Apr 2026 | 33.75% |
| Additional rate | 39.35% | 39.35% |
Corporation Tax
| Profits | Rate |
|---|
| Up to £50,000 | 19% (small profits rate) |
| £50,001 – £249,999 | 19%–25% (marginal relief applies) |
| £250,000 and above | 25% (main rate) |
Marginal relief fraction: 3/200. Thresholds divide proportionately if you have associated companies.
Use the HMRC marginal relief calculator.
National Insurance (2026/27)
| Type | Threshold | Rate |
|---|
| Employee NIC (Class 1) | £12,570 – £50,270/yr | 8% |
| Employee NIC (Class 1) | Over £50,270/yr | 2% |
| Employer NIC (secondary) | Over £5,000/yr ↑ Changed Apr 2025 | 15% |
| Employment Allowance | Max offset on employer NIC | £10,500 (eligibility rules apply — most sole-director PSCs cannot claim) |
VAT
| Item | Figure |
|---|
| Registration threshold (rolling 12 months) | £90,000 ↑ Was £85,000 |
| Standard rate | 20% |
| Flat Rate Scheme — IT consultancy | 14.5% (but most IT contractors qualify as limited-cost traders: 16.5%) |
Pension
| Item | 2026/27 |
|---|
| Annual allowance | £60,000 |
| Lifetime allowance | Abolished April 2024 |
| Taper applies when | Threshold income > £200,000 AND adjusted income > £260,000 (minimum tapered allowance: £10,000) |
2. Optimal Director Salary (2026/27)
For a sole-director PSC with no other employees and no Employment Allowance entitlement,
the personal allowance salary of £12,570 remains the most tax-efficient option
at both the 19% and 25% Corporation Tax rates. The Corp Tax saving still outweighs the employer NIC cost.
| Salary option | Employer NIC | Corp Tax saving (19%) | Corp Tax saving (25%) | Net benefit vs nil salary |
|---|
| £0 | £0 | £0 | £0 | £0 |
| £5,000 (secondary threshold) | £0 | £950 | £1,250 | £950 / £1,250 |
| £6,708 (LEL) | £256 | £1,275 | £1,677 | £1,019 / £1,421 |
| £12,570 (personal allowance) | £1,136 | £2,388 | £3,143 | £1,252 / £2,007 |
Assumes: no other employment income, no other employees, 2026/27 rates.
Confirm your optimal salary with your accountant — individual circumstances differ.
3. Making Tax Digital for Income Tax — Timeline
| From | Who it affects |
|---|
| 6 April 2026 Now live | Sole traders & landlords with qualifying income > £50,000 in 2024/25 |
| 6 April 2027 | Qualifying income > £30,000 in 2025/26 |
| 6 April 2028 | Qualifying income > £20,000 in 2026/27 |
Limited-company directors are not in scope for MTD for Income Tax on company profits alone —
only if they also have sole-trader or property income above the threshold.
4. IR35 & Off-Payroll — Current Position (July 2026)
Who determines your status?
Public sector clients: responsible since April 2017.
Medium/large private & voluntary sector: responsible since 6 April 2021.
Small clients (Companies Act test: 2 of 3 — turnover < £10.2m, balance sheet < £5.1m, < 50 employees): you self-assess.
Status Determination Statement (SDS)
Medium/large clients must issue an SDS stating the conclusion and the reasons.
If no SDS is issued, liability falls on the client. CEST output can serve as the SDS.
Challenging an SDS
Put your disagreement in writing to the client. The client must respond within 45 days.
If they don't, liability transfers to them. The original determination stays in force during the dispute period.
The key status tests (unchanged)
Control: who directs what, how, when and where you work?
Substitution: is your right to send a substitute genuine and unfettered?
Mutuality of obligation: weak on its own — control and substitution carry more weight.
Working practices beat the contract (ESM0510): what actually happens on the ground is what HMRC assesses.
5. What Changed from the Print Edition
| Item | Print edition had | Current figure |
|---|
| Dividend allowance | £1,000 | £500 |
| Dividend tax — basic rate | 8.75% | 10.75% (from April 2026) |
| Dividend tax — higher rate | 33.75% | 35.75% (from April 2026) |
| Employer NIC rate | 13.8% | 15% (from April 2025) |
| Employer NIC secondary threshold | £9,100/yr | £5,000/yr (from April 2025) |
| VAT registration threshold | £85,000 | £90,000 |
| CEST tool version | Pre-2025 | Updated April 2025 |
| MTD for Income Tax | Future/upcoming | Live from 6 April 2026 (£50k+ threshold) |