How UK Tax Thresholds Have Changed
The most significant change between 2024/25 and 2025/26 was the reduction in the employee National Insurance contribution rate from 10% to 8% on earnings between the Primary Threshold (£12,570) and the Upper Earnings Limit (£50,270). This was announced in the Spring Budget 2024 and represented a meaningful increase in take-home pay for most workers. You can run current year calculations directly on our homepage using the salary after tax calculator.
Frozen Thresholds — Fiscal Drag Explained
Despite the NI rate reduction, the Personal Allowance (£12,570) and Higher Rate threshold (£50,270) have been frozen since 2021/22. As wages rise with inflation, more workers are progressively drawn into the Basic and Higher Rate tax bands — a phenomenon economists call "fiscal drag". This means even without formal tax rises, workers effectively pay more tax each year.
Scottish Tax Rates
Scottish taxpayers are subject to different Income Tax rates set by the Scottish Government, with additional bands such as Starter Rate (19%) and Intermediate Rate (21%). Scottish National Insurance rates remain the same as the rest of the UK, as NI is a reserved matter controlled by Westminster.
Tax Year Comparison FAQs
How did National Insurance change between 2024/25 and 2025/26?
The employee National Insurance rate was reduced from 10% to 8% on earnings between £12,570 and £50,270 in April 2024. This gave most basic-rate taxpayers an increase in their take-home pay.
Has the Personal Allowance changed between tax years?
The Personal Allowance has remained frozen at £12,570 since 2021/22 and is expected to remain frozen until at least 2027/28 as part of the Government's fiscal drag policy. This means inflation gradually increases the effective tax burden on workers over time.
What is fiscal drag?
Fiscal drag occurs when tax thresholds are frozen while wages rise with inflation. Workers are pushed into higher tax bands without a formal tax rate increase, increasing the Government's tax receipts. The frozen £12,570 Personal Allowance and £50,270 Higher Rate threshold are current examples.
