Personal tax allowance and income tax bands for 2026/27

The Personal Allowance is the amount of income you can earn each tax year before you pay income tax. For company directors, it also shapes how you pay yourself through salary and dividends. This guide gives the current figures and explains what they mean.

*This post was first written for 2024/25. It now shows the 2026/27 figures.*

The 2026/27 Personal Allowance

• Tax year: 6 April 2026 to 5 April 2027.
• Standard Personal Allowance: £12,570.
• Taper: if your adjusted net income is over £100,000, your allowance falls by £1 for every £2 above that limit. At £125,140 it is zero.

The allowance can be different if you claim Marriage Allowance or Blind Person's Allowance, or if you owe tax from an earlier year that is being collected through your tax code.

Income tax bands: England, Wales and Northern Ireland

These bands apply to taxable income from employment, self-employment, pensions and property, assuming the standard allowance:

• 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%

Income tax bands: Scotland

If you live in Scotland, Scottish income tax applies to your non-savings, non-dividend income. The 2026/27 bands are:

• Starter rate: £12,571 to £16,537 - 19%
• Basic rate: £16,538 to £29,526 - 20%
• Intermediate rate: £29,527 to £43,662 - 21%
• Higher rate: £43,663 to £75,000 - 42%
• Advanced rate: £75,001 to £125,140 - 45%
• Top rate: over £125,140 - 48%

Where you live decides which rates apply, not where your company is registered.

Other allowances worth knowing

• Marriage Allowance: a lower earner can transfer £1,260 of their allowance to a spouse or civil partner who pays basic rate tax.
• Blind Person's Allowance: £3,250, added to your Personal Allowance.
• Dividend Allowance: £500 of dividends a year tax-free.
• Personal Savings Allowance: £1,000 for basic rate taxpayers and £500 for higher rate taxpayers. Additional rate taxpayers get none.
• Trading and property allowances: £1,000 each for small amounts of self-employed or property income.

Dividend tax rates for 2026/27

Dividends above the £500 allowance are taxed at:

• Basic rate: 10.75%
• Higher rate: 35.75%
• Additional rate: 39.35%

Dividends use up your bands after your other income, so a director's salary affects which rate applies to their dividends.

What this means for company directors

Many directors of small companies take a modest salary and the rest as dividends. The Personal Allowance often covers most or all of that salary. But the best mix depends on National Insurance, Corporation Tax, your other income and whether you live in Scotland. Rules and rates change most years.

Points to watch:

• The £100,000 to £125,140 range. Because the allowance is withdrawn here, income in this range is taxed at a high effective rate. Pension contributions or the timing of dividends may help, but get advice first.
• Self Assessment. Directors who take dividends above the allowance, or have other untaxed income, usually need to file a Self Assessment tax return.
• Your tax code. Check it each year. A wrong code means paying too much or too little tax through payroll.

Please speak to an accountant before deciding how to pay yourself. Your situation is personal, and the right answer depends on the full picture.

How Form My Company can help

We prepare and submit Self Assessment tax returns for directors and sole traders – see our Self Assessment service. Need payroll for your own salary? See Bookkeeping, VAT and Payroll. For company year-end work, our Annual Accounts service has you covered.

Frequently asked questions