The 2025/26 tax year brought more frozen thresholds, further allowance cuts, and a few welcome changes. Here is what high earners need to know.
The personal allowance remains at £12,570 and the higher rate threshold stays at £50,270 — frozen since 2021/22. With wages rising, more people are being dragged into higher tax bands each year. This is fiscal drag: a hidden tax rise without any headline rate change.
The additional rate threshold stays at £125,140 (reduced from £150,000 in 2023/24). If you earn above this, you pay 45% on every additional pound.
For high earners, the key issue remains the personal allowance taper between £100,000 and £125,140, creating the 60% effective marginal rate. Our 60% trap analysis tool shows exactly how this hits your take-home pay.
Employee NI rates were cut in 2024 (from 12% to 8% on earnings between £12,570 and £50,270) and this lower rate continues into 2025/26. The upper rate remains 2% above £50,270.
Employer NI, however, increased to 15% from April 2025 (up from 13.8%), and the threshold at which employers start paying dropped from £9,100 to £5,000. While employees do not pay this directly, it increases the cost of employment and may affect salary negotiations, bonuses, and salary sacrifice calculations.
The tax-free dividend allowance dropped to £500 (from £1,000 in 2024/25 and £2,000 the year before). If you hold investments outside an ISA or take dividends from a company, you will pay tax on almost all of it.
Dividend tax rates remain: 8.75% (basic), 33.75% (higher), 39.35% (additional). This makes ISA and pension wrappers more important than ever for sheltering investment income.
The annual CGT exemption stays at £3,000 (halved from £6,000 in 2023/24, down from £12,300 two years before). Rates remain at 10%/20% for most assets and 18%/24% for residential property.
With such a small exemption, even modest investment gains will trigger a tax liability. Consider spreading disposals across tax years and using bed and ISA strategies to shelter future growth.
The £60,000 annual allowance continues, with the lifetime allowance fully abolished (no tax charge on large pension pots). This is good news for high earners building significant pension wealth. See our pension tax relief guide for how to maximise your contributions.
Carry forward from the previous 3 years remains available. If you have unused allowance from 2022/23, 2023/24, or 2024/25, you can make larger contributions in 2025/26.
From 2024/25, the HICBC threshold rose from £50,000 to £60,000, with full repayment at £80,000. This continues into 2025/26. If you earn between £60,000 and £80,000, pension contributions can reduce or eliminate the charge entirely.
Review your tax position with our free calculator to see exactly where you stand for 2025/26. If you are in the 60% trap band, use our tax strategies tool to model the savings from pension contributions and salary sacrifice. And if you have investments outside tax-efficient wrappers, now is the time to move them into ISAs — see our ISA guide.