Spring Budget 2026: What It Means for Your Take-Home Pay

The headline numbers: what changed in April 2026

The Spring Budget 2026 made no changes to the core income tax rates or thresholds for England, Wales and Northern Ireland. The Personal Allowance remains at £12,570, the basic rate at 20%, and the higher-rate threshold at £50,270. Similarly, the employee NI main rate stays at 8%.

What did change — and what affects take-home either directly or indirectly — is a cluster of measures:

The two biggest levers for ordinary employees are the NLW increase (which feeds through to gross pay at the bottom of the earnings distribution) and the employer NI changes (which increase the cost of employing people and may dampen pay rises across the board).

How fiscal drag works — and why frozen thresholds matter

Frozen thresholds are a stealth tax increase. When the Personal Allowance stays at £12,570 but wages rise with inflation, a growing share of each salary becomes taxable.

A concrete example: the ONS Average Weekly Earnings index rose by approximately 5.5% in 2025. An employee earning £30,000 in 2025/26 earning the same real-terms purchasing power in 2026/27 would earn roughly £31,650. That extra £1,650 is fully taxable at 20% + 8% NI = 28% — costing them approximately £462 in additional deductions they didn't face a year earlier.

Over the four-year freeze (2022 to 2026), HMRC estimates the freeze has brought approximately 2.5 million additional people into income tax and pushed around 1.8 million into the higher-rate band who would not have reached it under pre-freeze indexation.

The Resolution Foundation estimates the cumulative value of the freeze to HM Treasury is approximately £25 billion per year by 2027/28 — equivalent to a 2p rise in the basic rate, but politically far less visible.

Worked example: £25,000 salary

This salary sits entirely in the basic-rate band in 2026/27.

Comparison with a hypothetical unfrozen allowance (indexed to CPI): if the PA had risen with CPI (cumulative ~22% since 2021/22), it would now be approximately £15,100. That would cut the tax bill by approximately £504/yr — a take-home of £22,024 vs £21,520. The freeze costs this earner ~£42/month.

Worked example: £35,000 salary

A £35,000 salary earner is firmly in "basic-rate land." The marginal rate on any pay rise is 28% (20% IT + 8% NI) until £50,270.

NLW context: at £12.21/hr for 37.5 hours/week over 52 weeks, a full-time NLW worker earns approximately £23,870/yr in 2026/27. Their take-home at £23,870 is approximately £20,254 (£1,688/month) — up from £19,382 (£1,615/month) at the old £11.44/hr rate. The NLW rise adds approximately £73/month take-home.

Worked example: £50,000 salary

£50,000 sits just below the higher-rate threshold (£50,270), so virtually all income remains in the basic-rate band.

Key threshold alert: if your salary is £50,271 or above, the rate on the excess is 40% IT + 2% NI = 42%. A £1 pay rise above £50,270 costs you 42p in deductions. Salary sacrifice into pension is particularly effective here — contributing £5,000/yr to a pension costs you only £2,900 in take-home because you save £2,100 in tax and NI.

Worked example: £80,000 salary

At £80,000 the higher-rate band applies to a significant portion of income.

Personal Allowance taper warning: the PA is withdrawn at £1 for every £2 earned above £100,000. Between £100,000 and £125,140, the effective marginal rate is 60% (40% IT + 20% "shadow" from PA reduction + 2% NI). Anyone approaching £100,000 should model salary sacrifice urgently.

Scotland comparison: the same salary, a higher bill

Scotland's six-band Income Tax system produces materially different take-home figures. NI is identical (reserved to Westminster).

Scotland's 2026/27 bands:

The Intermediate rate (21% vs England's 20%) and Higher rate (42% vs England's 40%) are the main reasons for the gap. At £50,000, a Scottish taxpayer pays £1,541/yr more in income tax — approximately £128/month.

Winners from Spring Budget 2026 take-home measures

NLW workers. The rise from £11.44 to £12.21/hr adds approximately £1,600/yr gross for a full-time worker. After income tax and NI (at low marginal rates near the Personal Allowance), the net gain is approximately £870/yr (£73/month).

Pension contributors via salary sacrifice. There are no changes to pension annual allowances or salary sacrifice rules, meaning the NI-saving benefit of salary sacrifice remains fully intact. An employee contributing 10% of a £50,000 salary via salary sacrifice saves £400/yr in NI alone — on top of income tax relief.

Lower-earning employers using Employment Allowance. The Employment Allowance rises from £5,000 to £10,500 per year. Eligible small employers can offset their entire employer NI bill — a real cash benefit that may translate into better pay or conditions for employees.

Losers from Spring Budget 2026 take-home measures

Threshold-freeze victims at every salary level. As wages grow, more income crosses thresholds. A £30,000 earner in 2022/23 who has had two 5% pay rises is now on roughly £33,100 — £2,100 more is now taxable at 28% than if the PA had been indexed.

Employers — and by extension, employees in pay negotiations. Employer NI rising from 13.8% to 15% on a wider base (threshold down from £9,100 to £5,000) costs a typical employer approximately £900–£1,200 more per employee per year. This squeezes the budget available for pay rises, particularly in sectors with many lower-paid workers (retail, hospitality, care).

Higher earners approaching £100,000. The PA taper means the 60% marginal rate corridor (£100,000 – £125,140) remains deeply punishing. No relief was provided.

Salary sacrifice: your best defence against frozen thresholds

With thresholds frozen and employer NI rising, salary sacrifice into pensions or permitted benefits (electric cars, cycle-to-work, childcare vouchers) is the most effective tool available to ordinary employees.

The employer also saves NI on salary sacrifice — many employers pass some or all of this saving back to the employee (typically as an enhanced employer pension contribution).

What this means for your payslip

From April 2026, the main changes visible on a typical payslip are:

1. No change to income tax codes for most employees — standard code 1257L reflects the unchanged £12,570 PA.
2. NI stays at 8% on earnings between £12,570 and £50,270, then 2% above.
3. NLW workers will see higher gross pay — the increase should be visible in the first payslip after April 2026 for hourly-paid staff.
4. No change to student loan thresholds — Plan 2 at £28,470, Plan 5 at £25,000.

If your tax code has changed unexpectedly, use HMRC's Check Your Income Tax tool or call HMRC on 0300 200 3300.

Sources

• HMRC: Income Tax rates and Personal Allowances
• HMRC: National Insurance: rates and thresholds
• HM Treasury: Spring Budget 2026 documentation
• Revenue Scotland: Scottish Income Tax rates 2026/27
• Low Pay Commission: National Living Wage 2026 recommendations
• Resolution Foundation: [Autumn Budget 2024 distributional analysis]