What you need to know about new tax rules, thresholds, and allowances
As we move into the 2025/26 tax year, it’s important to be aware of the latest changes that could impact your personal or business finances. From frozen thresholds to new allowances, these updates could affect everything from your take-home pay to your investment returns and retirement planning.
At Kingston Burrowes, we believe in keeping our clients informed — so here’s a clear, practical breakdown of what’s now in effect.
Income Tax Bands and Thresholds
While there’s been no increase to the personal allowance or higher-rate threshold, that in itself is a change worth noting.
- Personal allowance remains frozen at £12,570
- Higher-rate threshold stays at £50,270
With wages continuing to rise in some sectors, more people are being pulled into higher tax bands. This “fiscal drag” means you could find yourself paying more tax, even if your circumstances haven’t changed significantly.
Tip: If you’re close to the higher-rate threshold, salary sacrifice schemes or pension contributions could help mitigate the impact.
Capital Gains Tax (CGT)
The Capital Gains Tax annual exempt amount has been halved again:
- Now £3,000 (down from £6,000 in 2024/25)
If you’re planning to sell assets like shares or a second property, you’ll need to plan carefully — more of your gain may now fall within the chargeable amount.
Dividend Allowance
Another important cut:
- Dividend allowance reduced to just £500 (previously £1,000)
This significantly reduces the amount you can earn in dividends tax-free. For directors and investors, this makes tax planning — and the structure of how you pay yourself — even more essential.
Child Benefit: High-Income Charge Reform
There’s good news here.
- Threshold for the High-Income Child Benefit Charge increases to £60,000
- Tapering now ends at £80,000 (previously £60,000)
This makes it more beneficial for higher-earning households to claim Child Benefit. Many families who previously opted out may now find it worthwhile to reassess their entitlement.
ISA Limits and Pension Contributions
- ISA allowance remains at £20,000
- Lifetime ISA rules unchanged
- Annual pension allowance remains at £60,000
While limits haven’t changed, the power of tax-efficient saving and investing is still significant. These allowances can help reduce your taxable income and build long-term financial resilience.
National Insurance and Self-Employed Updates
There have been key changes for both employees and the self-employed:
- Employee Class 1 NICs reduced to 8% (from 10%)
- Self-employed Class 4 NICs down to 6%
- Class 2 NICs abolished from April 2024
These changes are designed to ease the burden slightly, especially for lower and middle earners. That said, self-employed individuals should still ensure their contributions count toward State Pension entitlement.
Thinking about how best to manage rising tax bills or protect your personal finances?
Now might be the right time to go limited — here’s what to weigh up
What Now?
If you’re unsure how these changes may affect you — or you want to make the most of your allowances and minimise your tax liability — we’re here to help. Whether you’re a business owner, investor, or employee, tailored advice can make all the difference.
Want to take a step back and review your 2024/25 year-end in more detail?
Here’s how to reflect on what worked — and what to change for 2025/26
Get in touch with the Kingston Burrowes team to talk through your plans for the year ahead and make sure you’re financially prepared for 2025/26.
