Changes to Tax Codes & Allowances in 2025/26

Staying on top of tax changes shouldn’t take hours. This article breaks down the key updates to tax codes and allowances for 2025/26, so you can stay informed and in control without getting lost in the jargon.

Changes to Allowances in 2025/26

Here’s a quick rundown of the biggest changes to allowances for the 2025/26 tax year.

1. Personal Allowance and Income Tax Bands

The personal tax allowance 2025/26 remains at £12,570, meaning you can earn up to this amount before paying income tax.​​

Here’s the UK Income Tax Rates 2025/26 for England and Northern Ireland.

Basic Rate (20%): Income between £12,571 and £50,270.​

Higher Rate (40%): Income between £50,271 and £125,140.​

Additional Rate (45%): Income above £125,140.​

These UK tax brackets remain unchanged, but their impact could increase due to inflation.

2. Dividend Allowance

The tax-free dividend allowance remains at £500. Dividends exceeding this amount are taxed based on your income tax band:​

Basic Rate: 8.75%​

Higher Rate: 33.75%​

Additional Rate: 39.35%​

3. Marriage Allowance

The Marriage Allowance for 2025/26 remains unchanged. It allows a spouse or civil partner to transfer £1,260 of their personal allowance to their partner, which can reduce their tax by up to £252 a year - as long as one partner earns below the personal allowance and the other is a basic rate taxpayer.

4. Capital Gains Tax (CGT) Allowance

The annual tax-free CGT allowance is reduced to £3,000 (down from £6,000 in 2024/25). Gains above this tax threshold 2025/26 are taxed at rates depending on your income and the type of asset.​

5. National Insurance Contributions (NICs)

Employer NICs increased from 13.8% to 15%, with the threshold lowered from £9,100 to £5,000. This means businesses will pay more in NICs for each employee earning above this threshold.​

On the other hand, employment allowance increased from £5,000 to £10,500, allowing eligible employers to reduce their NICs bill.​

What’s Happening with Tax Codes in 2025/26?

The standard tax code for 2025/26 remains 1257L, which reflects the same Personal Allowance of £12,570.

There have been no major changes to tax codes this year. But since income tax thresholds are still frozen, more of your income could be pulled into higher tax bands - even with the same code.

Why it matters? You might not see a new code, but your tax bill could still go up due to inflation or pay rises. This is often referred to as fiscal drag.

Quick tip: If your income has changed or your code doesn’t look right, it’s worth checking with HMRC or your accountant to make sure you’re not overpaying.

What We Think

We think the tax system is becoming harder for small business owners and freelancers to navigate. While changes are often presented as small, they can have a bigger impact than expected, especially when they're not clearly explained.

In our view, HMRC could do more to make these updates easier to understand and act on. Many people are doing their best to stay compliant but end up confused or caught out by unclear rules or last-minute changes.

How JAFA Can Help

At JAFA, we turn complicated tax changes into clear, simple advice that’s easy to act on. We keep up with every update, so you don’t have to, and explain exactly what matters for your business in plain English.

If you're unsure what a tax code means, worried about missing something, or just want to stay compliant without the stress, we’ve got your back. Our team helps you plan ahead, avoid penalties, and make sense of shifting rules so you can stay focused on running your business.

Whether it’s one-off advice or ongoing support, we’re here to help you feel confident, not confused, when it comes to tax.

Contact our expert accountants based in Birmingham, UK, either by booking a FREE discovery call or calling us on +44 121 227 6277.