Income tax (rates / brackets)

Income tax in the United Kingdom is a progressive tax system administered by Her Majesty's Revenue and Customs (HMRC) under the Income Tax Act 2007. The current standard rates for the 2026–2027 tax year are 20% on ordinary income up to £50,270, 40% on income between £50,271 and £125,140, and 45% on income exceeding £125,140. Scotland operates separate bands with a starter rate of 19% on income up to £12,570, a basic rate of 20% on £12,571 to £50,270, an intermediate rate of 21% on £50,271 to £125,140, and a higher rate of 42% above that threshold. Dividend tax rates have increased for 2026–2027, with the basic rate rising to 8.75%, the higher rate to 33.75%, and the additional rate to 39.35%.

From 6 April 2027, the United Kingdom will mandate payrolling of benefits in kind (PBIK), a significant change requiring employers to report and process certain non-cash benefits through payroll rather than through annual self-assessment. This reform simplifies tax administration for both employers and employees by integrating benefit taxation into real-time payroll systems.

Employers and payroll teams must ensure compliance with current rates and brackets for the 2026–2027 tax year and prepare systems to accommodate PBIK payrolling from April 2027. This includes updating payroll software, training staff on new reporting requirements, and reviewing benefit policies to understand which benefits will fall under the new payrolling regime. Accurate withholding and timely reporting to HMRC remain essential obligations.