Spring Statement 2026: What Changes for Your Tax Bill — Worked Examples at £25k, £50k and £100k

The HMRC income tax rates and allowances page confirms the following rates for 2025/26, carrying forward unchanged into 2026/27:

• Personal Allowance: £12,570 (reduced by £1 for every £2 earned above £100,000)
• Basic rate: 20% on income from £12,571 to £50,270
• Higher rate: 40% on income from £50,271 to £125,140
• Additional rate: 45% on income above £125,140

These thresholds have been frozen since 2021/22 and are legislated to remain frozen until at least April 2028. The Spring Statement did not announce any changes to this freeze. While the freeze was originally introduced to raise revenue without headline rate increases, it means that every pay rise pushes more income into higher bands — a phenomenon known as fiscal drag.

For Scottish taxpayers, the picture is more complex. Scotland has six income tax bands for 2025/26, including a starter rate of 19%, an intermediate rate of 21%, a higher rate of 42%, an advanced rate of 45%, and a top rate of 48%. These Scottish rates apply to non-savings, non-dividend income only.

While income tax thresholds stayed put, National Insurance contributions saw a significant shift from April 2025 — one confirmed in the Spring Statement.

For employees, the Class 1 NI rate is 8% on earnings between the Primary Threshold (£12,570 per year) and the Upper Earnings Limit (£50,270 per year), plus 2% on earnings above £50,270. This is unchanged from 2024/25, when the employee rate was cut from 10% to 8%.

The bigger change affects employers. The employer NI rate rose from 13.8% to 15% from April 2025, and the Secondary Threshold — the point at which employers start paying NI — dropped sharply from £9,100 per year (£175/week) to £5,000 per year (£96/week). This means employers pay NI on a much larger slice of each employee's salary.

While employer NI is not deducted from your payslip directly, economists widely agree it affects hiring decisions, pay rises, and overall labour costs. The Office for Budget Responsibility estimated this change would raise approximately £25 billion per year — the largest single revenue-raising measure in the Autumn Budget 2024.

At a gross salary of £25,000, you sit comfortably within the basic rate band. Here is how your deductions break down for 2025/26:

Income Tax:

• Personal Allowance: £12,570 (tax-free)
• Taxable income: £25,000 − £12,570 = £12,430
• Tax at 20%: £12,430 × 0.20 = £2,486

Employee National Insurance:

• NI-free: first £12,570 (Primary Threshold)
• NI at 8%: (£25,000 − £12,570) × 0.08 = £994.40

Total deductions: £2,486 + £994.40 = £3,480.40 Take-home pay: £25,000 − £3,480.40 = £21,519.60 (86.1% of gross)

Compared to 2023/24 (when employee NI was 12%), you would have paid £1,491.60 in NI — so the NI cut saves this earner roughly £497 per year. However, the frozen personal allowance means that each year wages rise without thresholds adjusting, more income is taxed. A £25,000 earner in 2021/22 with the same real purchasing power would have been on roughly £21,500, paying less tax on the lower nominal amount.

For more on how income tax bands work, see our comprehensive tax guide.

At £50,000, you are close to the higher rate threshold — and fiscal drag is starting to bite. Here is the 2025/26 breakdown:

Income Tax:

• Personal Allowance: £12,570
• Basic rate band: £50,270 − £12,570 = £37,700 (but your income is £50,000)
• Taxable at 20%: (£50,000 − £12,570) = £37,430 × 0.20 = £7,486

Employee National Insurance:

• NI at 8%: (£50,000 − £12,570) × 0.08 = £2,994.40

Total deductions: £7,486 + £2,994.40 = £10,480.40 Take-home pay: £50,000 − £10,480.40 = £39,519.60 (79.0% of gross)

The 2023/24 comparison is telling. With NI at 12%, the NI bill would have been £4,491.60 — so the NI cut saves roughly £1,497 per year. But the frozen higher rate threshold at £50,270 means a modest pay rise to £51,000 would push £730 of income into the 40% band, costing an extra £146 in tax. This is fiscal drag in action.

Your employer, meanwhile, now pays 15% NI on your earnings above just £5,000 — that is £6,750 in employer NI, compared to £5,644 under the old rules. This increased cost may temper future pay rises.

For strategies to reduce your tax bill, including pension contributions and salary sacrifice, see our pensions hub and our guide to ISA planning.

At £100,000, you face the personal allowance taper — one of the UK tax system's most punitive features. Your personal allowance reduces by £1 for every £2 of income above £100,000, creating an effective marginal rate of 60% between £100,000 and £125,140.

Income Tax:

• Income above £100,000: £0 (exactly at the threshold)
• Personal Allowance: £12,570 (still intact at exactly £100,000)
• Basic rate: £37,700 × 0.20 = £7,540
• Higher rate: (£100,000 − £50,270) × 0.40 = £19,892
• Total income tax: £27,432

Employee National Insurance:

• NI at 8%: (£50,270 − £12,570) × 0.08 = £3,016
• NI at 2%: (£100,000 − £50,270) × 0.02 = £994.60
• Total NI: £4,010.60

Total deductions: £27,432 + £4,010.60 = £31,442.60 Take-home pay: £100,000 − £31,442.60 = £68,557.40 (68.6% of gross)

But here is the critical point: if you earn £100,001, you lose £1 of personal allowance — meaning £1 of income that was tax-free is now taxed at your marginal rate (40%). So that £1 of extra income costs you 40p in lost allowance tax plus 40p in income tax on the extra pound plus 2p in NI = an effective marginal rate of approximately 62%. This continues until your personal allowance is fully eroded at £125,140.

The single most effective strategy for a £100,000 earner is to make pension contributions that bring adjusted net income below £100,000, preserving the full personal allowance. A £1,000 pension contribution could save £600 in tax through the taper alone. See our pensions guide for more detail.

With just weeks left in the 2025/26 tax year, several allowances reset on 6 April that cannot be carried forward:

• ISA allowance: You can save up to £20,000 tax-free in ISAs this year. Any unused allowance is lost on 6 April. See our ISA hub for a full breakdown of ISA types.
• Pension contributions: The annual allowance is £60,000 (or your total earnings, whichever is lower). You can carry forward up to three years of unused allowance — but only if you had a pension in those years.
• Capital Gains Tax: The annual exempt amount is £3,000 for 2025/26. If you have gains to crystallise, doing so before 6 April uses this year's exemption.
• Dividend allowance: £500 tax-free dividends for 2025/26 — down from £1,000 in 2023/24.
• Marriage Allowance: If you or your partner are a non-taxpayer, you can transfer £1,260 of personal allowance to the basic-rate taxpaying partner, saving up to £252. This can be backdated up to 4 years.

For earners near the £100,000 threshold, making pension contributions or charitable donations before 5 April can preserve your personal allowance and deliver effective tax relief of 60%.

The Spring Statement confirmed that 2026/27 will operate under largely the same tax framework. Income tax thresholds remain frozen, National Insurance rates for employees stay at 8%, and the employer NI changes from April 2025 continue.

The Bank of England base rate currently stands at 3.75%, down from 5.25% at its peak in August 2023. Further cuts are expected in 2026, which would reduce mortgage costs for those on variable rates or coming off fixed deals, while putting downward pressure on savings rates.

Key dates for 2026/27:

• 6 April 2026: New tax year begins — all allowances reset
• 19 March 2026: BoE MPC interest rate decision
• 31 July 2026: Second payment on account for self-assessment
• 5 April 2027: End of 2026/27 tax year

The combination of frozen thresholds and rising wages means fiscal drag will continue to be the UK government's quiet revenue raiser. The Institute for Fiscal Studies estimates that threshold freezes will bring 4 million more people into paying income tax by 2028/29 compared to a system where thresholds rose with inflation. Planning ahead — through pension contributions, ISA usage, and tax-efficient investing — remains the best defence.

For our full analysis of the Chancellor's statement, read our Spring Statement 2026 reaction piece. For savings strategies in a falling rate environment, see our savings hub.

This article is for informational purposes only and does not constitute regulated financial advice. Tax rules can change and individual circumstances vary. You should consult a qualified financial adviser before making decisions based on the information in this article.