Every tax-free allowance available to UK taxpayers in 2026/27 — in one place, in plain English. From the personal allowance to the annual pension limit.
The 2026/27 tax year runs from 6 April 2026 to 5 April 2027. While most headline rates and thresholds remain unchanged from last year, there are some important shifts — notably the 2% rise in dividend tax rates. With income tax thresholds frozen until 2031, understanding every allowance available to you has never been more important.
Here is every major tax-free allowance for 2026/27 at a glance:
Tax-free income for most UK taxpayers
Tax-free savings and investments per year
Maximum pension contribution with tax relief
Tax-free dividend income per year
Tax-free interest for basic rate taxpayers
Tax-free capital gains per year
Personal allowance transfer between spouses
Tax-free rental income from your home
The personal allowance is the amount you can earn each year before paying any income tax. For 2026/27 it remains at £12,570 — the same figure it has been since 2021/22, and it will stay frozen at this level until April 2031.
The freeze matters because wages and prices have risen significantly since 2021. As salaries increase, more people cross into higher tax bands without any change to the rates themselves. This process is known as fiscal drag and it is estimated to cost the average worker hundreds of pounds more in tax each year compared to if thresholds had risen with inflation.
If your adjusted net income exceeds £100,000, your personal allowance is reduced by £1 for every £2 above that threshold. By the time your income reaches £125,140, your personal allowance is reduced to zero. This creates an effective 60% marginal tax rate in this band — one of the most punishing quirks in the UK tax system.
See exactly what you keep after tax and NI for any salary
Once your income exceeds the personal allowance, it is taxed in bands. The rates below apply in England, Wales and Northern Ireland. Scotland has its own income tax rates set by the Scottish Government.
| Band | Taxable income | Tax rate |
|---|---|---|
| Personal allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
These thresholds are all frozen until April 2031. This means that as wages rise, an increasing number of people will find themselves paying higher rate tax for the first time.
National Insurance (NI) is a separate tax on earnings, paid by both employees and employers. The employee NI rate is 8% on earnings between the primary threshold and the upper earnings limit, and 2% above that.
| Threshold | Annual amount | Effect |
|---|---|---|
| Primary threshold (employee) | £12,570 | NI starts at 8% |
| Upper earnings limit | £50,270 | Rate drops to 2% |
| Secondary threshold (employer) | £5,000 | Employer NI starts at 15% |
Self-employed workers pay Class 4 NI at 6% on profits between £12,570 and £50,270, and 2% above that. Class 2 NI was abolished from April 2024.
Every UK adult can save or invest up to £20,000 per year in an Individual Savings Account (ISA). All growth, income and withdrawals within an ISA are completely free of tax — no income tax, no capital gains tax, ever.
You can contribute up to £60,000 per year into a pension (or 100% of your earnings, whichever is lower) and receive tax relief on contributions. This is one of the most generous tax breaks available in the UK.
Tax relief works by topping up your contribution with the tax you would have paid. Basic rate taxpayers get 20% relief, higher rate taxpayers can claim back an additional 20% (for a total of 40%), and additional rate taxpayers can claim 45% relief overall.
If you have not used your full annual allowance in the previous three tax years, you may be able to carry it forward — allowing contributions of more than £60,000 in a single year. This can be particularly useful for those with fluctuating incomes or a one-off windfall.
For high earners, the annual allowance tapers down. If your threshold income exceeds £200,000 and your adjusted income exceeds £260,000, the allowance reduces by £1 for every £2 above £260,000, down to a minimum of £10,000.
If you receive dividends — from shares you own or as a company director — the first £500 is tax-free. This is the dividend allowance, and it applies regardless of your other income.
Dividends above £500 are taxed at your dividend tax rate, which depends on which income tax band you fall into:
| Tax band | Dividend tax rate 2026/27 | Change from 2025/26 |
|---|---|---|
| Basic rate | 10.75% | Up from 8.75% |
| Higher rate | 35.75% | Up from 33.75% |
| Additional rate | 39.35% | No change |
The dividend allowance has been cut sharply in recent years — from £5,000 in 2017/18 to £500 today. If you hold dividend-paying investments, sheltering them inside an ISA eliminates dividend tax entirely.
Calculate your exact dividend tax bill for 2026/27
Interest earned on savings is taxed as income, but you have a tax-free allowance before any tax is due. The amount depends on your income tax band:
| Tax band | Personal savings allowance |
|---|---|
| Basic rate taxpayer | £1,000 |
| Higher rate taxpayer | £500 |
| Additional rate taxpayer | £0 |
With interest rates higher than they were a few years ago, more savers are now exceeding their personal savings allowance and facing an unexpected tax bill. If you regularly earn more interest than your allowance, consider moving savings into a cash ISA, where all interest is permanently tax-free.
Premium Bond prizes from NS&I are also completely free of income tax and do not count towards your savings allowance — making them worth considering if you have large cash savings.
When you sell an asset for a profit — shares, investment property, or other assets — capital gains tax (CGT) may be due. The first £3,000 of gains each tax year is completely free of CGT. This is the annual exempt amount.
Gains above £3,000 are taxed at:
| Asset type | Basic rate taxpayer | Higher/additional rate taxpayer |
|---|---|---|
| Shares and investments | 18% | 24% |
| Residential property | 18% | 24% |
| Business assets (BADR) | 14% | 14% |
The CGT allowance cannot be carried forward — if you do not use it in a tax year, it is lost. A useful strategy is to crystallise up to £3,000 in gains each year by selling and (if desired) rebuying assets, gradually reducing future CGT exposure. Married couples each have a £3,000 allowance, allowing £6,000 in combined gains to be taken tax-free each year.
Calculate CGT on shares, property or other assets
If you are married or in a civil partnership and one of you earns less than the personal allowance (£12,570), that person can transfer £1,260 of their unused personal allowance to their partner — provided their partner is a basic rate taxpayer (not higher or additional rate).
The transfer reduces the higher earner's tax bill by £252 per year. You can also backdate claims for up to four years, meaning couples who have been eligible but not claimed could receive a lump sum of up to £1,008.
Claims are made through HMRC's online service and take effect immediately.
If you rent out a room in your own home, the first £7,500 of rental income per year is completely tax-free. If two people share the income (for example a couple), each gets a £3,750 allowance.
If you earn casual income from self-employment — selling items online, occasional freelance work — the first £1,000 per year is tax-free under the trading allowance. You do not need to declare or pay tax on income below this amount.
Similarly, the first £1,000 of property income (from land or property) is tax-free under the property allowance. This applies to income from renting a parking space, for example.
Registered blind people can claim an additional £3,070 tax-free allowance on top of the personal allowance. Any unused amount can be transferred to a spouse or civil partner.
For inheritance tax purposes, you can give away £3,000 per year completely free of IHT. This allowance can be carried forward one year if unused, meaning up to £6,000 in a single year.