Henry OptUK Tax Rules 2025/26
A guide to income tax, National Insurance, and tax allowances for the 2025/26 tax year (6 April 2025 – 5 April 2026)
Income Tax Bands
Income tax in the UK is progressive, meaning higher earnings are taxed at higher rates. The 2025/26 tax year follows these bands for England, Wales, and Northern Ireland:
Scotland has different rates. Visit Revenue Scotland for details.
Personal Allowance
The Personal Allowance is the amount of income you can earn tax-free each year.
2025/26 Personal Allowance: £12,570
Once your income exceeds £100,000, your Personal Allowance is reduced by £1 for every £2 earned above this threshold. At £125,140, the Personal Allowance is completely withdrawn.
National Insurance Contributions
National Insurance (NI) is a separate tax that funds benefits and pensions. There are different rates for employees:
Self-employed and employer contributions have different rules.
Marriage Allowance
If one spouse or civil partner earns below the Personal Allowance and the other earns between £12,570 and £50,270, unused allowance can be transferred, saving up to £252 per year.
Pension Contributions
Via salary sacrifice, pension contributions save both Income Tax and National Insurance. The net cost to you for every £100 going into your pension:
- Basic rate (20% tax + 8% NI): £100 into pension costs you £72 net
- Higher rate (40% tax + 2% NI): £100 into pension costs you £58 net
- Additional rate (45% tax + 2% NI): £100 into pension costs you £53 net
Annual allowance: £60,000. Personal SIPP contributions work differently — basic rate relief is added at source, higher rate relief is claimed via self-assessment.
Salary Sacrifice
Salary sacrifice allows you to exchange part of your salary for tax-free or lower-taxed benefits. Common schemes include:
- Pension contributions (tax and NI saving)
- Cycle to Work scheme (tax and NI savings on bike purchase)
- Electric vehicle schemes (reduced BIK tax)
Future change: From April 2029, employer National Insurance savings on salary sacrifice will be capped at £2,000/year.
Child Benefit
Child Benefit is £26.05/week for the first child and £17.25/week for each additional child. However, High Income Child Benefit Charge (HICBC) applies:
If your income exceeds £60,000, you pay back 1% of Child Benefit received for every £200 earned above £60,000. HICBC is triggered at £60,000 and gradually claws back all benefits by £80,000.
30 Hours Free Childcare
Working parents are eligible for 30 hours per week of free childcare if:
- The parent (or their partner) is in receipt of an eligible employment income
- Neither parent earns more than £100,000 (adjusted net income threshold)
- The child is aged 3 or 4 years old
Both parents cannot have income above £100,000. If they do, eligibility is lost for both.
Tax-Free Childcare
Parents earning under £100,000 (adjusted net income) can use Tax-Free Childcare to receive up to 20% government top-up on childcare costs:
Student Loans Repayment
Repayment thresholds and rates vary by when you took out your loan:
Key Dates
- Tax year starts: 6 April 2025
- Tax year ends: 5 April 2026
- Self-assessment deadline: 31 January 2027
- Pension contributions deadline: 5 April 2026
Use Henry Opt to Calculate Your Tax
Henry Opt uses these rules to calculate your personalised tax position. Enter your income details to see your exact tax liability, National Insurance, and available tax-saving opportunities.
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This information is for general guidance and reflects the UK tax rules for 2025/26. It is not financial advice. Tax rules change frequently. For current information and personalised advice, consult the HMRC website or a qualified tax professional.