Tax Allowances for 2026/27: What UK Taxpayers Need to Know

The 2026/27 tax year runs from 6 April 2026 to 5 April 2027, which makes this the ideal time to review your tax position before opportunities are lost. Many people only think about tax allowances when they come to complete their tax return, but by then some of the most useful planning options have gone. A missed ISA subscription cannot be recreated after the tax year ends, pension contribution timing can matter, and Capital Gains Tax planning is usually far more effective before a disposal takes place.

For 2026/27, several key allowances remain central to personal tax planning, including the £20,000 ISA allowance, the £60,000 pension annual allowance, the £12,570 Personal Allowance, the £500 dividend allowance, the £3,000 Capital Gains Tax annual exempt amount, and the Personal Savings Allowance of £1,000 for basic-rate taxpayers and £500 for higher-rate taxpayers.

For employees, landlords, investors, sole traders and company directors, these allowances are still valuable, but they now need to be used more carefully than in the past. The dividend allowance and CGT exemption are much smaller than they once were, and more taxpayers are being pulled into reporting obligations as digital tax systems expand. Good tax planning in 2026/27 is less about complicated strategies and more about using the rules properly and on time.

ISA allowance for 2026/27

The ISA allowance for 2026/27 is £20,000. This remains one of the most valuable tax-efficient wrappers available because income and gains generated within an ISA are generally free from UK tax. The Lifetime ISA limit remains £4,000, and the Junior ISA allowance remains £9,000.

In practical terms, an eligible adult can subscribe up to £20,000 across ISA accounts during the tax year. That allowance can be used in one account or split across different ISA types. The important point is that the Lifetime ISA limit is included within the overall £20,000 allowance, rather than sitting on top of it. So if you contribute £4,000 to a Lifetime ISA, you have £16,000 of annual ISA capacity left.

The Junior ISA allowance of £9,000 is separate from the adult ISA allowance, which makes it a useful option for families who want to save for a child’s future without reducing their own personal ISA limit.

For many taxpayers, ISA planning matters more than ever. Savings interest outside an ISA may become taxable once the Personal Savings Allowance is used up. Investment income outside an ISA may lead to dividend tax, and gains on disposals may create CGT issues more quickly now that the annual exempt amount is so much lower. Used consistently, ISAs can provide long-term protection against all three.

Another practical advantage is the greater flexibility in how people can subscribe to ISAs. The rules are more practical than they used to be, making it easier to use different providers for different goals. That can help savers separate cash holdings from investments or compare service and fee levels more effectively.

The key planning lesson is simple: do not wait until the end of the tax year. Early ISA use can protect more of your future interest, dividends and gains from tax.

Pension annual allowance for 2026/27

For the 2026/27 tax year, the standard pension annual allowance is £60,000. This is the amount of pension saving you can usually build up in the year before an annual allowance charge may arise. However, the headline figure only tells part of the story.

A common misunderstanding is that the annual allowance only measures personal pension contributions. In reality, it generally includes the full pension input, including contributions made by you, your employer, or someone else on your behalf in a defined contribution arrangement. For company directors and business owners, this matters because employer contributions can quickly use up a large part of the available allowance.

Higher earners also need to watch for the tapered annual allowance. Where income is high enough, the £60,000 figure can be reduced significantly, potentially down to £10,000. This is one reason why large one-off pension contributions should usually be checked carefully before they are made.

Another key issue is the Money Purchase Annual Allowance (MPAA), which remains £10,000. This can apply where someone has already flexibly accessed a defined contribution pension. In other words, taking money out of a pension can affect how much you can put back in later on a tax-efficient basis.

There may also be scope to use carry forward from the previous three tax years if you have unused annual allowance available. This can be particularly useful for directors, consultants and self-employed individuals whose income changes from year to year.

From a planning point of view, pensions work best when they are reviewed alongside salary, dividends, cash flow and wider tax liabilities. This is one area where proactive accountancy support can add real value.

Personal Allowance for 2026/27

The standard Personal Allowance for 2026/27 is £12,570. This is the amount of income most people can receive before they start paying Income Tax. It is a familiar figure, but it is often misunderstood.

The Personal Allowance is only one part of your tax position. It does not tell you everything about how much tax you will pay, because tax bands and different types of income also matter. In England, Wales and Northern Ireland, the basic rate limit remains £37,700, meaning that a person with the full Personal Allowance usually starts paying higher-rate tax once their total taxable income exceeds £50,270. Scottish taxpayers still receive the same Personal Allowance, but they face different tax bands on earned income.

One of the most important planning points is what happens once income goes above £100,000. At that stage, the Personal Allowance begins to reduce by £1 for every £2 of adjusted net income above the threshold, and it disappears entirely at £125,140.

This creates a well-known pressure point in the tax system, especially for directors, landlords, consultants and other taxpayers with more than one source of income. Salary alone might not seem especially high, but when dividends, rental income, savings income or self-employment profits are added in, the allowance can begin to disappear faster than expected.

That is why Personal Allowance planning works best when it is looked at as part of the full picture. Pension contributions, for example, can be especially relevant for some higher earners because they may help reduce adjusted net income.

Dividend allowance for 2026/27

For the 2026/27 tax year, the dividend allowance remains £500. This means that an individual can receive up to £500 of dividend income before paying tax on that income.

This is a much smaller allowance than many people still assume. Older online guides often refer to a £1,000 or £2,000 dividend allowance, but those figures are out of date. For company directors and investors alike, the current allowance provides only limited protection.

Dividend tax rates also matter. For 2026/27, dividends above the allowance are taxed at 10.75% for basic-rate taxpayers, 35.75% for higher-rate taxpayers, and 39.35% for additional-rate taxpayers.

A crucial point is that dividend tax is not calculated in isolation. Your dividend rate depends on your overall Income Tax band, which means salary, self-employment profits, pension income, rental income and other taxable income can all affect the rate that applies.

For limited company directors, this means dividends still need to be planned carefully. They may remain part of a sensible profit extraction strategy, but the small allowance means they cannot be treated as automatically tax-efficient in the way they were sometimes described in older advice. Salary, employer pension contributions, corporation tax, available profits and the director’s wider personal income position should all be reviewed together.

For investors, the reduced dividend allowance makes tax wrappers even more important. Holding investments within an ISA or pension can help reduce personal tax exposure on dividends.

Capital Gains Tax allowance for 2026/27

For individuals, the Capital Gains Tax annual exempt amount remains £3,000 in 2026/27. This is the amount of net gains you can usually realise in the tax year before CGT becomes payable.

The key word is net. The allowance does not apply separately to each asset. Instead, it applies to your overall gains after allowable losses are taken into account.

This matters much more than it used to, because the annual exemption is now so much smaller than in previous years. More ordinary disposals of shares, investment funds, business assets and second properties can now create a tax charge or at least trigger the need for careful review.

For 2026/27, the main CGT rates on many gains are now 18% and 24%, depending on the asset and the individual’s wider tax position. That means many older articles on CGT rates are now outdated.

With a smaller exemption, timing has become more important. Where commercially sensible, it may be possible to spread disposals across tax years or use losses more effectively. Transfers between spouses or civil partners may also help in some situations, since they can often be made on a no gain/no loss basis.

The main practical point is that CGT planning is usually most effective before the disposal happens. After the event, many of the options are gone.

Personal Savings Allowance for 2026/27

The Personal Savings Allowance remains important in 2026/27. For basic-rate taxpayers, it is £1,000. For higher-rate taxpayers, it is £500. Additional-rate taxpayers do not get a Personal Savings Allowance.

This means many people can still earn some interest on bank or building society accounts outside an ISA without paying tax on that interest. However, as savings rates and cash balances increase, it is becoming easier for people to exceed the allowance.

Someone holding a large emergency fund, a house deposit, or substantial cash reserves outside an ISA may find that interest accumulates quickly across the year. Higher-rate taxpayers, in particular, may exceed their £500 allowance sooner than expected.

There is also a starting rate for savings of up to £5,000 for some lower-income individuals, but this is separate from the Personal Savings Allowance and depends on the level of non-savings income.

For many savers, the broader lesson is that ISAs remain highly valuable. Interest within an ISA is not taxed in the same way, which can provide far more certainty than relying only on the Personal Savings Allowance.

Practical planning tips for 2026/27

The best tax planning is usually simple and timely. For 2026/27, that means reviewing your position before the tax year ends and before decisions become irreversible.

If you are holding savings or investments outside wrappers, check whether more should be moved into an ISA. If you are close to the £100,000 income level, review whether pension contributions may help protect your Personal Allowance. If you are a company director, make sure salary, dividends and employer pension contributions are being reviewed together rather than separately.

If you are a sole trader or landlord, 2026/27 is also an important year because Making Tax Digital for Income Tax begins for many taxpayers from 6 April 2026. Those with qualifying income over the threshold need to keep digital records and use compatible software. That makes good bookkeeping more important than ever.

Self Assessment deadlines still matter too. Online tax returns and balancing payments are generally due by 31 January, with payments on account often falling on 31 January and 31 July.

For employers, reliable payroll processes remain essential. For construction businesses, CIS returns and payment deadlines need to be managed consistently throughout the year.

How LT Accounting can help

At LT Accounting, the aim is not simply to file forms after the event. It is to help clients make better decisions while there is still time for those decisions to matter.

Our accountancy support helps clients understand how allowances interact across salary, dividends, pension contributions, savings and gains. Our bookkeeping services provide accurate records that support better tax planning and better decisions throughout the year. Our payroll support helps employers stay on top of PAYE, pensions and staff payments.

For growing businesses, management accounts can provide the visibility needed to plan remuneration, track profits and make informed decisions before year end. We also support clients with year-end accounts, self-assessments, VAT returns and CIS returns, helping ensure that both compliance and planning are handled properly.

In a tax environment where allowances are tighter and reporting requirements are becoming more digital, proactive support can make a meaningful difference.

Conclusion

The allowances available for 2026/27 still offer valuable planning opportunities, but they need to be used deliberately. The ISA allowance, pension annual allowance, Personal Allowance, dividend allowance, Capital Gains Tax annual exempt amount and Personal Savings Allowance all matter, but they work best when they are reviewed together.

For many UK taxpayers, the right approach is straightforward: review early, keep accurate records, and make sure your savings, investments, business income and tax reporting all work together. That is where proactive accountancy support can really help.