What’s New in UK Personal Tax and Self-Employment for 2026–2027?

We have entered the 2026–2027 UK tax year, and for individuals, employees, and sole traders, there are no major increases in income tax rates. However, the impact of frozen thresholds continues to affect most taxpayers.

The personal allowance remains at £12,570. Income tax bands remain unchanged in England, Wales and Northern Ireland, with rates at 20%, 40% and 45%. Scotland continues with its separate multi-band system.

Although rates are unchanged, the continued freezing of thresholds means many individuals will still pay more tax over time due to “fiscal drag”, as income increases push taxpayers into higher bands.

Tax Codes in PAYE – What It Means For You As Employee

The standard tax code remains 1257L, with no uplift applied for 2026–2027. This means HMRC has not adjusted tax codes to reflect inflation or fiscal changes this year.

In practical terms, this means employees may see increased tax deductions over time even if their tax code remains the same. This is a result of unchanged thresholds rather than a direct tax increase.

National Insurance and Employment Income

National Insurance thresholds remain broadly unchanged, with only minor adjustments to the Lower Earnings Limit. Employees and self-employed individuals will therefore see relatively stable NIC structures compared to last year.

National Minimum Wage and Employee Entitlements

The National Minimum Wage has increased from April 2026. Employees aged 21 and over are now entitled to £12.71 per hour, with lower rates for younger workers and apprentices.

Statutory Sick Pay has also increased in scope and is now payable from day one of sickness. This means more employees will qualify for statutory support than in previous years.

Statutory parental pay has also increased to £194.32 per week, reflecting wider cost-of-living adjustments.

MTD for Self-Employment, Sole Traders

For sole traders and self-employed individuals, the underlying income tax rates remain unchanged.

However, compliance requirements continue to evolve, particularly around Making Tax Digital (MTD). From April 2026, more taxpayers are expected to fall under digital record-keeping and quarterly reporting requirements as HMRC expands MTD obligations.

Self-employed individuals should ensure they are maintaining accurate digital records and preparing for ongoing MTD expansion.

What This Means for Taxpayers

While there are no major headline tax increases, the combined effect of frozen thresholds, wage increases, and expanded reporting obligations means individuals should review their tax position carefully.

Understanding allowances, expenses, and compliance obligations is increasingly important for both employees and self-employed individuals.

Professional advice can help ensure tax returns are completed correctly and in the most tax-efficient manner.

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