Landscape for
Individuals and Companies
The 2025/2026 UK tax year, which runs from 6 April 2025 to 5 April 2026, brings several confirmed changes, notably the continued freeze of key allowances and a major reform to the taxation of non-UK domiciled individuals. Businesses must also navigate the tiered Corporation Tax system and the perennial choice between operating as a sole trader or a limited company.
Many of the core allowances and tax bands for Income Tax remain frozen until April 2028, maintaining the personal allowance at its current level.
| Tax Rate/Allowance | Taxable Income / Allowance | Rate (2025/2026) | Notes |
|---|---|---|---|
| Personal Allowance | Up to £12,570 | 0% | Tapered for income over £100,000, resulting in a £0 allowance for income over £125,140. |
| Basic Rate | £12,571 to £50,270 | 20% | England, Wales, NI. Scotland has different rates/bands. |
| Higher Rate | £50,271 to £125,140 | 40% | |
| Additional Rate | Over £125,140 | 45% | |
| Employee NICs (Main Rate) | £12,571 to £50,270 | 8% | Reduced from 12% in previous years. |
| Self-Employed Class 4 NICs | £12,570 to £50,270 | 6% | Reduced from 9%. Class 2 NICs abolished. |
| Dividend Allowance | £0 to Allowance | £500 | Reduced from £1,000 in 2024/25. |
| Dividend Tax Rates (Over Allowance) | Basic, Higher, Additional | 8.75%, 33.75%, 39.35% | Rates unchanged. |
| CGT Annual Exempt Amount | £0 to Allowance | £3,000 | Reduced from £6,000 in 2024/25. |
| CGT Rates (Non-Residential Property) | Basic/Higher Rate Band | 18%, 24% | Increased from 10%/20% for disposals after 30 Oct 2024. |
The Corporation Tax system remains tiered, rewarding smaller businesses while applying a higher rate to those with substantial profits.
| Profit Range | Corporation Tax Rate (2025/2026) | Notes |
|---|---|---|
| Small Profits Rate | Profits up to £50,000 | 19% |
| Marginal Relief | £50,001 to £250,000 | Effective Rate: 19% to 25% |
| Main Rate | Profits over £250,000 | 25% |
Employer NICs: The main rate of Employer National Insurance Contributions (Class 1) is set at 15% on earnings above the Secondary Threshold (£65,000 per year).
| Feature | Sole Trader (Unincorporated Business) | Limited Company (Incorporated Business) |
|---|---|---|
| Tax Paid By Business | Income Tax and Class 2/4 NICs on profits. | Corporation Tax on profits. |
| Owner's Tax Burden | Owner pays Income Tax on all business profits above the Personal Allowance. | Directors take salary (PAYE/NICs) and dividends (Dividend Tax). |
| Tax Rates | Income Tax (up to 45%) and NICs (up to 6%/2%). | Corporation Tax (19%/25%) + Dividend Tax (up to 39.35%). |
| Liability | Personal: Owner is responsible for all debts. | Limited: Personal assets protected. |
| Tax Efficiency | More efficient for lower profits (below £30k–£50k). | More efficient for higher profits (max 25% retained). |
| Admin | Simpler, Self Assessment, cash basis common. | More complex, annual accounts to Companies House & HMRC. |
In summary, the 2025/2026 tax year is defined by frozen allowances, a tiered Corporation Tax regime, and a landmark shift to residence-based tax for high-net-worth individuals. Careful planning is advised for all affected.