This guide tells you about the current tax rates and allowances. Use this guide to find out about:
- personal allowances for income tax;
- income tax rates and bands;
- National Insurance contributions for sole traders and partners in a business partnership;
- National Insurance contributions for directors of limited companies and employees;
- corporation tax; and
- value added tax (VAT).
Income tax allowances
| Personal allowances | 2024/25 | 2025/26 |
|---|---|---|
| Personal allowance (1) | £12,570 | £12,570 |
| Income limit for personal allowance (2) | £100,000 | £100,000 |
| Income limit for married couple’s allowance (3) | £37,000 | £37,700 |
| Married couple’s allowance (maximum amount) (4) | £11,080 | £11,270 |
| Married couple’s allowance (minimum amount) (5) | £4,280 | £4,360 |
| Blind person’s allowance | £3,070 | £3,130 |
Notes
(1) and (2) If your adjusted net income is above £100,000, your Personal allowance is reduced by £1 for every £2 above this figure.
(3) Where income is above this figure, the relief for Married couple’s allowance is reduced by £1 for every £2 above this figure.
(4) and (5) The relief for Married couple’s allowance is given at 10%.
Income tax rates and bands
| 2024/25 | 2025/26 | |
|---|---|---|
| Basic rate 20% | Up to £37,700 | Up to £37,700 |
| Higher rate 40% | Above £37,700 up to £125,140 | Above £37,700 up to £125,140 |
| Additional rate 45% | Above £125,140 | Above £125,140 |
- Income tax is paid on the amount of taxable income remaining after you have deducted any allowances you are entitled to, such as the Personal allowance and Blind person’s allowance.
- Your Personal allowance goes down by £1 for every £2 that your adjusted net income is above £100,000. This means that your Personal allowance is zero if your income is £125,140 or above for tax years 2024/25 and 2025/26.
- Tax relief for finance costs for individual landlords of residential properties is fully restricted to the Basic rate only.
- From 2025/26 tax relief for finance costs for individual landlords of furnished holiday lets is also fully restricted to the Basic rate only.
Welsh Rates of Income Tax (WRIT)
Since 6 April 2019, if you live in Wales, you will pay the WRIT. If you are self-employed you will be asked about your country of residence on your self assessment tax return.
Welsh tax payers currently pay the same amount of tax as people living in England, but 10% will go directly to the Welsh Government. For more information, see GOV.Wales.
National Insurance contributions class 2 and class 4
| 2024/25 | 2025/26 | |
|---|---|---|
| Class 2 (6) | £3.45pw | £3.50pw |
| Class 2 - Small profits threshold | £6,725pa | £6,845pa |
| Class 4 - Lower profits limit | £12,570pa | £12,570pa |
| Class 4 – Upper profits limit | £50,270pa | £50,270pa |
| Class 4 – Rate between upper and lower profits limit | 6% | 6% |
| Class 4 – Rate above upper profits limit | 2% | 2% |
Notes
(6) From 2024/25 self-employed individuals no longer have to pay Class 2 National Insurance contributions. Although, self-employed individuals with profits below the Small profits threshold can make voluntary contributions.
Example calculations
- If you are under retirement age and either a sole trader or a partner in a partnership, the following example calculations will help you work out an estimate of the monthly income tax and National Insurance you should pay on your profit from your business.
- You will then be able to work out your Available drawings from your business. This will help you work out your household budget to show you what you have available to pay your creditors.
- In the following examples, the figure worked out on the business budget sheet for Drawings (what your profit is before tax and National Insurance) is £4,250 per month.
- The example calculations should not be used for income from residential properties or furnished holiday lets.
Online calculations
If you prefer, you can use My Budget to do the income tax and National Insurance calculations for you.
Estimated monthly income tax calculation for 2025/26
| 1. | Take the monthly Available drawings figure from Your business and household budget sheet | £4,250 | A |
| 2. | Multiply Figure A by 12 to get your yearly drawings figure | £51,000 | B |
| 3. | Insert your Personal allowance for income tax figure | £12,570 | C |
| 4. | Take Figure C (your Personal allowance for income tax) away from Figure B (your yearly drawings) to work out what part of your drawings you pay tax on | £38,430 | D |
| 5. | Multiply the first £37,700 of Figure D by 20% to work out how much Basic rate tax you need to pay | £7,540 | E |
| 6. | Take £37,700 away from Figure D and multiply the answer by 40% to work out how much Higher rate tax you need to pay (you only need to do this step if Figure D is more than £37,700) | £292 | F |
| 7. | Add together Figure E and Figure F to get an estimate of your yearly tax liability | £7,832 | G |
| 8. | Divide Figure G by 12 to get an estimate of your monthly tax liability | £652.67 | H |
Use H £652.67 as the Estimated tax figure on your business and household budget.
Estimated Class 4 National Insurance contribution calculations for 2025/26
| 1. | Use Figure B from above (unless Figure B is more than the Upper profits limit of £50,270, then insert £50,270) | £50,270 | I |
| 2. | Figure I minus £12,570 (the Lower profits limit) | £37,700 | J |
| 3. | Figure J multiplied by 6% (the rate payable between the lower and upper limits) | £2,262 | K |
| 4. | Figure B from above minus £50,270 (if the answer is less than 0, insert 0) | £730 | L |
| 5. | Figure L multiplied by 2% (the rate payable above the Upper profits limit) | £14.60 | M |
| 6. | Add together Figure K and Figure M to get your estimated yearly amount of Class 4 contribution | £2,276.60 | N |
| 7. | Divide Figure N by 12 to get your estimated monthly Class 4 contribution | £189.72 | O |
Use O £189.72 as the National Insurance class 4 figure on your business and household budget.
Online calculations
Remember, if you prefer, you can use My Budget. It will work out the income tax and National Insurance calculations for you.
National Insurance contributions class 1
Thresholds
| 2024/25 | 2025/26 | |
|---|---|---|
| Lower earnings limit primary class 1 | £123pw | £125pw |
| Upper earnings limit primary class 1 | £967pw | £967pw |
| Primary threshold | £242pw | £242pw |
| Secondary threshold | £175pw | £96pw |
Employee rates
| 2024/25 | 2025/26 | |
|---|---|---|
| Class 1 rate between primary threshold and upper earnings limit | 8% | 8% |
| Class 1 rate above upper earnings limit | 2% | 2% |
Employer rates
| 2024/25 | 2025/26 | |
|---|---|---|
| Secondary class 1 rate above secondary threshold | 13.8% | 15% |
| Class 1A rate on employer provided benefits | 13.8% | 15% |
For information about National Insurance thresholds and rates that apply to special categories, such as for employers of qualifying veteran, freeport and apprentice employees, see GOV.UK.
If your business is eligible for the Employment Allowance, you may be able to reduce your employers’ National Insurance liability. For more information, see GOV.UK
Corporation tax
For non-ring fence profit
| 2024/25 | 2025/26 | |
|---|---|---|
| Main rate (companies with profits over £250,000) | 25% | 25% |
| Small profits rate (companies with profits under £50,000) | 19% | 19% |
| Marginal relief lower limit | £50,000 | £50,000 |
| Marginal relief upper limit | £250,000 | £250,000 |
| Marginal relief fraction | 3/200 | 3/200 |
Since 1 April 2023, if your company has taxable profits between £50,000 and £250,000, you may be able to claim marginal relief to reduce your corporation tax rate from the 25% main rate. Use the GOV.UK calculator to work out how much marginal relief you can claim.
Value added tax (VAT)
| 2024/25 | 2025/26 | |
|---|---|---|
| Standard rate | 20% | 20% |
| Reduced rate | 5% | 5% |
| Zero rate | 0% | 0% |
| Registration level | £90,000 | £90,000 |
| De-registration level | £88,000 | £88,000 |
Unless HMRC gives an exemption from doing so, all VAT registered businesses must be signed up to Making Tax Digital for VAT whatever their turnover. For more information, go to GOV.UK.
