UK Tax Year & Allowances
How the UK tax year works, the key allowances and tax bands for income tax and National Insurance, and the Self Assessment deadlines you need to know.
UK Tax Year & Allowances
The UK tax year runs from 6 April to 5 April the following year. So the 2025–26 tax year started on 6 April 2025 and ends on 5 April 2026. Understanding the key allowances and deadlines helps you plan your finances and avoid penalties.
Personal Allowance
The Personal Allowance is the amount of income you can earn tax-free each year. For 2025–26 it is £12,570.
If your income exceeds £100,000, your Personal Allowance is reduced by £1 for every £2 over that threshold. This means it reaches zero at £125,140 — effectively creating a 60% marginal tax rate in that band.
Income Tax Bands (England & Northern Ireland, 2025–26)
| Band | Taxable income | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 – £50,270 | 20% |
| Higher rate | £50,271 – £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
Scotland has different bands — Scottish taxpayers should check the Scottish Government rates.
National Insurance Contributions (NICs)
Employees also pay National Insurance on earnings:
| Class | Who pays | Rate (2025–26) |
|---|---|---|
| Class 1 (Employee) | Employed earners | 8% on earnings £12,570 – £50,270; 2% above £50,270 |
| Class 1 (Employer) | Employers | 13.8% on earnings above £5,000 |
| Class 2 | Self-employed | £3.45/week (if profits above £12,570) |
| Class 4 | Self-employed | 6% on profits £12,570 – £50,270; 2% above |
NICs fund the State Pension and certain benefits. They are separate from income tax.
Other Key Allowances
| Allowance | 2025–26 Amount | What it covers |
|---|---|---|
| Dividend Allowance | £500 | Tax-free dividend income |
| Capital Gains Tax Annual Exempt Amount | £3,000 | Tax-free capital gains |
| Personal Savings Allowance | £1,000 (basic) / £500 (higher) | Tax-free savings interest |
| Marriage Allowance | £1,260 transfer | Transfer unused PA to spouse |
| Trading Allowance | £1,000 | Tax-free self-employment income |
| Rent-a-Room Allowance | £7,500 | Tax-free income from lodgers |
Self Assessment Deadlines
If you are self-employed, a company director, have income over £150,000, or have other untaxed income, you must file a Self Assessment tax return.
| Deadline | Date | What happens |
|---|---|---|
| Register for Self Assessment | By 5 October after the tax year ends | Register with HMRC |
| Paper return | 31 October | File on paper |
| Online return | 31 January | File online |
| Pay tax owed | 31 January | Pay the balance + first Payment on Account |
| Second Payment on Account | 31 July | Pay second instalment |
Late filing penalties:
- 1 day late: £100 immediate penalty
- 3 months late: £10/day (up to 90 days = £900)
- 6 months late: 5% of tax due or £300, whichever is greater
- 12 months late: further 5% or £300
PAYE — Tax You Never See
If you are employed, most of your tax is collected through PAYE (Pay As You Earn). Your employer deducts income tax and NICs from your salary before you receive it. Your tax code tells your employer how much Personal Allowance to apply.
Check your tax code on your payslip — the standard code for 2025–26 is 1257L. If it looks wrong, contact HMRC.
Planning Tips
- Use all your allowances — ISA, pension, CGT exemption, dividend allowance
- File early — you do not have to pay early, but filing early gives you certainty
- Check your tax code annually on your payslip or HMRC Personal Tax Account
- Set aside 25–30% of self-employed income for tax and NICs
Explain Like I'm 5
Tax is like sharing your sweets with the people who build your playground, keep the lights on, and make sure everyone is safe. The government lets you keep some sweets for free (that is your allowance), but after that, the more you earn, the more you share. Everyone follows the same rules so it is fair.
Key Takeaways
- The UK tax year runs from 6 April to 5 April. The Personal Allowance is £12,570 (reduced for incomes over £100,000).
- Income tax rates are 20% (basic), 40% (higher), and 45% (additional) in England and Northern Ireland.
- Self Assessment online returns and tax payments are due by 31 January following the end of the tax year.
- Employees should check their PAYE tax code (1257L for 2025–26) to ensure they are paying the right amount.
CoreFi shows your tax obligations and upcoming deadlines automatically.
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