Understanding Tax Rates for 2026/27: A Simple Guide

Your personal tax allowance is the amount you can earn before paying any income tax. For the 2026/27 tax year, the standard personal allowance is set at £12,570. If your earnings exceed this threshold, only the income above this amount will be taxed, allowing you to retain more of your income. This means if you earn £13,570, you only pay tax on the additional £1,000.

Income tax is structured in bands, meaning you only pay a higher tax rate on the portion of your income that falls within that band. For 2026/27, the bands are as follows:

• 0% on income up to £12,570
• 20% on income from £12,571 to £50,270
• 40% on income from £50,271 to £125,140
• 45% on income over £125,140

Understanding these bands can help you strategize your earnings and potential tax liabilities.

In addition to income tax, you must also consider National Insurance contributions, which help fund state benefits and pensions. The rates are different for employed and self-employed individuals, but generally, you start paying National Insurance once your earnings exceed £12,570 annually.

If you sell assets like stocks or property, you may be subject to Capital Gains Tax (CGT) on profits above the annual exempt amount, which is currently £3,000. Knowing when CGT applies is essential for managing your investments wisely.

Managing your finances effectively during tax season can be streamlined with Smart Expense. Our app automates expense tracking through features like receipt scanning and email reading, so you can easily keep records of your earnings and expenditures. This makes it simpler to calculate your taxable income and prepare for any tax obligations.