Income Tax & National Insurance Thresholds Freeze Extended
Income tax and national insurance thresholds will now stay the same until March 2031 which is three years later than the original freeze.
The personal allowance, i.e. the amount that can be earned without being subject to income tax is £12,570 per annum. This has remained the same since 2021.
Current Income Tax Bands
Band Taxable income Tax rate
Personal Allowance Up to £12,570 0%
Basic rate £12,571 to £50,270 20%
Higher rate £50,271 to £125,140 40%
Additional rate over £125,140 45%
Salary Sacrifice National Insurance Cap
National insurance relief will be capped at £2000 of annual salary sacrificed pension contributions from April 2029.
Currently if an employee contributes pensions via a salary sacrifice scheme they reduce their income by the amount of their pension contributions and neither they nor their employer pay tax or national insurance on the reduction.
From April 2029, employees will be able to reduce their income for the purposes of income tax by any amount they choose to contribute. However, they will only be able to reduce their income that is subject to national insurance by £2000 each year.
This means that both employees and employers will lose out on national insurance savings and may deter pension savings in the future.
National Minimum Wage Rates
National minimum wage rates will increase from April 2026 as follows
Age | Hourly Rate | % Increase from 2025 Rate |
Over 21s | £12.71 | 4.1% |
18 – 20 | £10.85 | 8.5% |
16 & 17 | £8.00 | 6.0% |
Mandatory Payrolling of Benefits in Kind
From April 2027 it will be mandatory to process all benefits in kind received by employees through their payslips in real time rather than via P11Ds.
Student loans
The repayment threshold for Plan 2 student loans will be frozen from 2027-28 until 2029-30 tax years.