Income tax (rates / brackets)

Income tax in the United Kingdom is a progressive tax system with rates and allowances that vary by tax year and, for Scottish residents, by region. For the 2026-2027 tax year, the standard rates apply across England, Wales, and Northern Ireland, while Scotland maintains separate bands with higher rates at upper income levels. Dividend tax rates have increased for 2026-2027, affecting investors and business owners who receive dividend income.

The system is governed by the Income Tax Act 2007 and subsequent Finance Acts, administered by His Majesty's Revenue and Customs (HMRC). The personal allowance—the amount individuals can earn tax-free—remains a key component, though it varies based on age and income level for older taxpayers.

Effective 6 April 2026, dividend tax rates increased across all regions. Scottish income tax bands were also adjusted for the 2026-2027 tax year, with modifications to the higher and top rates applicable to Scottish taxpayers. These changes reflect the government's fiscal policy adjustments and affect both employees and self-employed individuals.

Employers and payroll teams must ensure PAYE (Pay As You Earn) calculations reflect the updated rates and allowances from 6 April 2026. Scottish employers must correctly identify employee tax residency to apply the appropriate regional rates. Dividend-paying companies should review their withholding obligations given the increased dividend tax rates. Payroll software must be updated to reflect the new bands and rates, and employees should be informed of any changes affecting their net pay. Accurate tax coding notices from HMRC should be obtained and applied to ensure correct deductions throughout the tax year.