UK Tax Year Comparison

The headline story across recent UK tax years is stability in rates but erosion in real terms. The Personal Allowance has been fixed at £12,570 since April 2021, and the basic rate band ceiling at £50,270. The government extended this freeze through 2030-31 at Autumn Budget 2025, meaning that for at least ten consecutive years the thresholds have not kept pace with inflation or wage growth.

The most significant recent rate change was the National Insurance reduction. Employee Class 1 NI was cut from 12% to 10% in January 2024, then further to 8% from April 2024, and has stayed at 8%/2% through 2025-26 and 2026-27. This put more money in workers’ pockets but was partially offset by the threshold freeze.

Scotland has continued to set its own income tax rates, creating a six-band system that differs markedly from the three-band structure in England, Wales, and Northern Ireland. For 2026-27, the Scottish Budget raised the Starter and Basic band thresholds compared to 2025-26 (Intermediate, Higher, Advanced and Top thresholds stayed frozen), changing the amount of income taxed at each rate. Scottish taxpayers earning above roughly £33,500 pay more income tax than their English counterparts at the same salary, while those earning below that pay slightly less (the lower 19% Starter rate on the first slice of income outweighs the higher 21% Intermediate rate until income climbs further).

The Personal Allowance taper at £100,000 remains unchanged. Anyone earning between £100,000 and £125,140 faces an effective 60% marginal rate due to losing £1 of allowance for every £2 earned above £100,000. This trap has not been adjusted and continues to create a significant cliff for earners moving through that income range.

For most employees, the practical effect is that a pay rise may not deliver the expected increase in take-home pay. A worker earning £35,000 in 2021-22 who now earns £40,000 is paying tax on an additional £5,000 that would have been partially sheltered if thresholds had risen with CPI. This “fiscal drag” is the single biggest factor driving differences between tax years for middle-income earners.

Scenario: You earn £50,000 per year in England and want to compare 2026-27 with 2025-26.

Income Tax (both years): With the Personal Allowance at £12,570 and the basic rate band unchanged, your taxable income is £37,430. At 20%, income tax is £7,486 in both years.

National Insurance (both years): Employee Class 1 NI at 8% on earnings between £12,570 and £50,000 gives £37,430 × 8% = £2,994.40. The main rate has stayed at 8% since April 2024, unchanged for 2025-26 and 2026-27.

Total Deductions: £7,486 + £2,994.40 = £10,480.40 in both years.

Take-Home Pay: £50,000 − £10,480.40 = £39,519.60 per year, or about £3,293 per month.

Difference: For this particular salary in England, the 2026-27 and 2025-26 tax years produce identical results — thresholds and rates are frozen. The difference only appears if your salary has changed between years, or if you are in Scotland, where the Starter and Basic band thresholds were raised for 2026-27.