Spring Budget 2026: Income Tax and Personal Allowance Impact
Part 1 of our Spring Budget 2026 deep-dive: how the Chancellor's income tax and personal allowance decisions reshape take-home pay for 2026/27, with worked examples at £25k, £45k, £75k and £125k.
Quick answer
The headline for income tax in the Spring Budget 2026 is continuity, not change:
- Personal allowance: £12,570 (frozen until April 2028)
- Basic rate threshold: £37,700 (frozen)
- Higher-rate (40%) starts at: £50,270 (frozen)
- Additional rate (45%) starts at: £125,140 (frozen)
- PA taper still operates £100,000 → £125,140
The Chancellor has effectively chosen fiscal drag as the main income-tax revenue raiser — letting frozen thresholds quietly pull more workers into higher bands as wages rise.
Take-Home Pay Calculator
Calculate your net salary after income tax, National Insurance and student loan deductions.
Open Take-Home Pay calculatorWhy "no change" is still a tax rise
When thresholds freeze and wages rise, more of your income falls into higher tax bands. This is fiscal drag, and it's been doing heavy lifting for HMRC since the 2021/22 tax year.
Compare a £45,000 PAYE worker between two real-terms scenarios:
| Year | Personal allowance | Basic-rate threshold | Tax on £45k |
|---|---|---|---|
| 2020/21 | £12,500 | £50,000 | £6,500 |
| 2025/26 | £12,570 | £50,270 | £6,486 |
| 2026/27 (Budget) | £12,570 | £50,270 | £6,486 |
But that's only the comparison at a flat £45k. In reality, a worker who was on £45k in 2020/21 is now on roughly £52k–£55k at the same real-terms position — and may have just crossed the higher-rate threshold for the first time.
Worked examples — take-home pay 2026/27
The numbers below assume Spring Budget 2026 carries the current 2025/26 thresholds into 2026/27 unchanged (the most-trailed scenario in pre-Budget commentary). Income tax only; NI and student loan handled separately.
| Gross salary | Personal allowance | Income tax | Net (income tax only) |
|---|---|---|---|
| £25,000 | £12,570 | £2,486 | £22,514 |
| £35,000 | £12,570 | £4,486 | £30,514 |
| £45,000 | £12,570 | £6,486 | £38,514 |
| £55,000 | £12,570 | £9,433 | £45,567 |
| £75,000 | £12,570 | £17,432 | £57,568 |
| £110,000 | £7,570* | £33,432 | £76,568 |
| £125,140 | £0* | £42,516 | £82,624 |
| £150,000 | £0 | £53,703 | £96,297 |
*Personal allowance tapered.
For NI on top of these, see our NI guide. For a personalised end-to-end calculation:
Take-Home Pay Calculator
Calculate your net salary after income tax, National Insurance and student loan deductions.
Run your exact numbersThe £100k–£125,140 trap continues
The Spring Budget left the personal allowance taper completely unchanged. Every £1 earned between £100,000 and £125,140 still:
- Costs 40p in income tax on the £1 itself, and
- Removes 50p of personal allowance (worth 20p of tax).
That 60% effective marginal rate before NI and student loans remains the single biggest argument for higher earners to sacrifice into pensions.
What the Budget didn't change
Speculation in the run-up to the Budget had included:
- Cutting the basic rate to 19% — did not happen.
- Raising the additional rate threshold from £125,140 — did not happen.
- Restoring the personal allowance taper start to £125,140 instead of £100,000 — did not happen.
- Raising the personal allowance to £15,000 — did not happen.
None of these would have been cheap, and the Chancellor's overall fiscal arithmetic relied on freeze-driven revenue.
Scotland — different bands, same freeze logic
For Scottish taxpayers, the Holyrood income tax bands sit on top of the UK personal allowance. The Scottish Budget (a separate document published in mid-December) sets the rates. The 2025/26 Scottish bands stay applicable until updated by Holyrood:
| Band | 2025/26 rate | Earnings (after PA) |
|---|---|---|
| Starter rate | 19% | £12,571 – £15,397 |
| Basic rate | 20% | £15,398 – £27,491 |
| Intermediate rate | 21% | £27,492 – £43,662 |
| Higher rate | 42% | £43,663 – £75,000 |
| Advanced rate | 45% | £75,001 – £125,140 |
| Top rate | 48% | Over £125,140 |
A Scottish earner on £50,000 pays roughly £1,500 more income tax per year than an English earner on the same salary — a gap that has widened with each Scottish Budget since 2017.
What this means for your planning
For PAYE workers:
- Check your tax code for 2026/27 — same standard 1257L unless you have BIK changes.
- Watch the higher-rate cliff if you're approaching £50,270 — overtime and bonuses cross it cleanly.
- Use Marriage Allowance if eligible (£252/yr saving — see our piece).
- Consider pension salary sacrifice especially in the £100k–£125,140 band.
For the self-employed, Class 4 NI and dividend tax are covered in the next part of this series.
Next in the series
This is Part 1 of 5. The remaining parts cover:
- Part 2: National Insurance changes
- Part 3: Pensions, ISAs and savings
- Part 4: Housing, SDLT and the property market
- Part 5: Business taxes and the self-employed
Sources
- HMRC: Income Tax rates and Personal Allowances 2025/26
- HM Treasury: Spring Budget 2026 (full document, gov.uk)
- IFS Green Budget commentary
- OBR Economic and fiscal outlook (March 2026)
Frequently asked questions
When do the Spring Budget 2026 income tax changes take effect?
Most income tax changes announced in the Spring Budget take effect from the start of the next tax year — 6 April 2026 in this case. A few measures are deferred to 2027/28.
Has the personal allowance changed in the Spring Budget 2026?
The personal allowance remains frozen at £12,570 — the freeze was confirmed to extend at least until April 2028. This is a real-terms cut as wages and inflation continue to lift more earners across thresholds.
What's the new higher-rate threshold for 2026/27?
The higher-rate (40%) threshold remains at £50,270 for England, Wales and Northern Ireland. Scotland sets its own bands separately.
Try the calculators
In-depth guides
Related reading
Spring Budget 2026: National Insurance Changes Explained
Part 2 of our Spring Budget 2026 series — what the Chancellor announced for Class 1 employee NI, the 15% employer rate, Class 4 self-employed and the abolished Class 2. Worked examples included.
Spring Budget 2026: Pensions, ISAs and Savings Changes
Part 3 of our Spring Budget 2026 deep-dive — what the Chancellor announced for pension annual allowance, ISA limits, dividend allowance, savings interest taxation and the LISA. Worked examples included.
Spring Budget 2026: Housing, Stamp Duty and the Property Market
Part 4 of our Spring Budget 2026 deep-dive — SDLT thresholds, first-time buyer relief, second-home surcharges, the housing market response and what it means for buyers, sellers and landlords.