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For the 2026-2027 tax year starting April 6, 2026, the UK maintains frozen Personal Allowances at GBP 12,570 but increases dividend tax rates significantly (basic rate from 8.75% to 10.75%, higher rate from 33.75% to 35.75%). Scotland adjusts its starter and basic rate income bands upward. Married Couple's Allowance and Blind Person's Allowance thresholds also increase. These changes affect all UK taxpayers, with distinct implications for Scottish residents and those receiving dividend income.
UK Income Tax Rates Updated for 2026–2027: Dividend Tax Increases, Scottish Bands Adjusted
Effective 6 April 2026, the United Kingdom will implement significant changes to income tax rates for the 2026–2027 tax year. While the Personal Allowance remains frozen at GBP 12,570, dividend tax rates increase substantially across basic and higher rate bands, and Scotland adjusts its starter and basic rate income bands upward. These changes affect all UK taxpayers, with distinct implications for Scottish residents and individuals receiving dividend income.
Who is affected
All UK taxpayers, including employees, self-employed individuals, and company directors receiving dividend income in England, Wales, Northern Ireland, and Scotland. The changes particularly impact:
- Employees and contractors with dividend income from company shares or investments
- Scottish residents earning between GBP 2,828 and GBP 16,956 annually
- Married couples and blind individuals claiming specific allowances
- Employers operating payroll for UK-based employees across all four nations
What's changing
Dividend Tax Rates (England, Wales, Northern Ireland, and Scotland)
| Rate Band | 2025–2026 | 2026–2027 | Change |
|---|---|---|---|
| Basic rate | 8.75% | 10.75% | +2.00 pp |
| Higher rate | 33.75% | 35.75% | +2.00 pp |
| Additional rate | 39.35% | 39.35% | No change |
The Dividend Allowance remains at GBP 500.
Scottish Income Tax Bands
Scotland's starter and basic rate bands increase for 2026–2027:
| Band | 2025–2026 | 2026–2027 |
|---|---|---|
| Starter rate (19%) | GBP 0–GBP 2,827 | GBP 0–GBP 3,967 |
| Basic rate (20%) | GBP 2,828–GBP 14,921 | GBP 3,968–GBP 16,956 |
Intermediate, higher, advanced, and top rate bands remain unchanged.
Other Allowances
- Married Couple's Allowance (maximum): GBP 11,700 (up from GBP 11,270)
- Married Couple's Allowance (minimum): GBP 4,530 (up from GBP 4,360)
- Blind Person's Allowance: GBP 3,250 (up from GBP 3,130)
The Personal Allowance remains frozen at GBP 12,570 and continues to taper by GBP 1 for every GBP 2 of income above GBP 100,000.
England, Wales, and Northern Ireland
Income tax bands and rates remain unchanged from 2025–2026: 20% basic rate (GBP 0–GBP 37,700), 40% higher rate (GBP 37,701–GBP 125,140), and 45% additional rate (above GBP 125,141).
What NEO partners and clients should do
- By 31 March 2026: Update payroll systems to reflect the 2026–2027 tax bands, dividend rates, and allowances effective 6 April 2026.
- Before 6 April 2026: Verify employee tax codes with HMRC, particularly for Scottish employees and those claiming Married Couple's or Blind Person's Allowances.
- April 2026 payroll: Apply the increased dividend tax rates (10.75% basic, 35.75% higher) for employees receiving dividend income.
- For Scottish employees: Apply the adjusted starter rate band (GBP 0–GBP 3,967) and basic rate band (GBP 3,968–GBP 16,956) in April 2026 payroll runs.
Sources
- HM Revenue & Customs: Income Tax rates and allowances: current and past
