New tax year 2026: what’s changing and how to prepare
The new tax year starts on 6 April 2026, which makes it a great time to take stock of your money and see what’s changing. From tax allowances to minimum wage increases, there are a few updates that could affect how much you take home, and what you might want to do differently.
In this guide we'll cover what’s new, what it means for you, and a few simple steps to get your money in good shape for the year ahead.
A new tax year is the perfect excuse to get organised, and having a clear overview of your finances is a good place to start. Monzo current accounts help you to see your spending and manage your money in one place, making it easier to track your finances across the tax year.
When does the new tax year start?
The UK tax year runs from 6 April to 5 April the following year. So the 2026/27 tax year starts on 6 April 2026 and ends on 5 April 2027.
Understanding when the tax year starts matters because it affects when you need to pay your taxes, when tax allowances reset, and when you need to submit your tax return. It's also when new tax rates and allowances take effect. For example, if you're planning to use your ISA allowance or make pension contributions, you might want to do this before 5 April to make the most of any available allowances for the current tax year.
Personal tax allowance changes
Your ‘personal allowance’ is the amount you can earn before paying income tax. For 2026/27, the standard personal allowance stays at £12,570 – the same as it's been since 2021.
Here’s how income tax works across England, Wales and Northern Ireland (Scotland has its own tax rates): if you receive the full standard personal allowance, you won't pay tax on the first £12,570 you earn. After that, you'll pay 20% on earnings between £12,570 and £50,270, 40% on earnings between £50,271 and £125,140, and 45% on anything from £125,141 upwards.
If you earn over £100,000, your personal allowance reduces by £1 for every £2 you earn above this limit. Once your adjusted net income reaches £125,140, your personal allowance disappears entirely.
All these thresholds are currently frozen until at least 5 April 2031. That means as wages rise with inflation, more of your income gets pulled into higher tax bands without you feeling better off. It's known as ‘fiscal drag’, and it means you'll effectively pay more tax even though the rates haven't changed.
If you’re self-employed, you send your own tax return once a year (with quarterly updates throughout the year if you need to use Making Tax Digital) instead of having it deducted automatically from your earnings. Our Instant Access Savings Pots are one way to set money aside for tax payments or big expenses, keeping your savings separate from your spending money.
National Insurance and minimum wage updates
Just ahead of the next tax year, from 1 April 2026, the National Living Wage increases. The amounts vary depending on how old you are:
The Living Wage will rise to £12.71 per hour for workers aged 21 and over, a 50p rise from £12.21
If you're aged 18-20, your minimum wage goes up to £10.85 per hour
For 16-17 year olds and apprentices, it rises to £8.00 per hour
It’s worth noting that if you’re an employee who receives living accommodation from your employer, there are separate rules about pay.
The above increases mean more money in your pocket, but remember that higher earnings can push more of your income into tax. With frozen tax thresholds, a pay rise doesn't always mean as much extra take-home pay as you'd expect.
National Insurance contributions stay the same for most people. As an employee, you'll pay 0% on earnings up to £12,570 per tax year, 8% on earnings between £12,570 and £50,270, then 2% on anything above that. If your pay varies month-to-month, your contributions may differ from the yearly rates, as national insurance allowances apply to each payslip. For example, you pay 0% on the first £1,048 if you get paid monthly.
If you’re self-employed, Class 4 National Insurance stays at 6% on profits between £12,570 and £50,270, and 2% on profits above £50,270. If you’re a business owner, you can automatically set money aside for tax from everything you earn with a Monzo Pro business account. (£9 a month, only sole traders or limited company directors, and landlords in the UK can apply, Ts&Cs apply.)
Dividend tax and Personal Savings Allowance
If you own shares that pay dividends (a portion of a company’s profits paid out to you when you own its shares), the tax rates are going up from 6 April 2026:
The basic rate climbs from 8.75% to 10.75%
The higher rate jumps from 33.75% to 35.75%
The additional rate stays at 39.35%
You can still earn £500 in dividends tax-free through the dividend allowance. But with higher rates on anything above that, an ISA may be used to earn tax-free interest on savings. A cash ISA lets you save up to £20,000 tax-free, which can be useful if you're earning interest above your Personal Savings Allowance.
The Personal Savings Allowance lets you earn interest on your savings without paying tax. Basic-rate taxpayers can earn up to £1,000 in tax-free interest, while higher-rate taxpayers get £500. If you're an additional-rate taxpayer, you don't get a Personal Savings Allowance.
None of the Personal Savings Allowance limits are changing for the 2026/2027 tax year. But there are changes coming to the cash ISA allowance with effect from 6 April 2027. The £20,000 limit for ISAs is staying the same, but for anyone aged under 65, the cash ISA limit is dropping to £12,000. The remaining £8,000 will only be available for other types of ISA, like Stocks and Shares. Those aged 65 and over are exempt from this change.
The tax rate on savings will also be increasing, but not until 6 April 2027. The new rates will be:
Basic rate taxpayer: 22% (up from 20%)
Higher rate taxpayer: 42% (up from 40%)
Additional rate taxpayer: 47% (up from 45%)
How to prepare your finances for the new tax year
There are a few steps you can take before 6 April to make the most of the current tax year and get ready for the new one.
First, check your tax code on your payslip (if you’re employed). Make sure it matches your actual income and any benefits you get. If anything doesn’t look right, or your tax code’s changed and you weren’t expecting it, you can ask HMRC to check it for you.
Another thing you can do is use your ISA allowance if you haven't already. The deadline is 5 April 2026, and you can save or invest up to £20,000 tax-free, and it doesn't roll over to the next year.
Review your pension contributions. The money you put into your pension gets tax relief, which can reduce your tax bill. If your income is close to £100,000, pension contributions can help you avoid losing your personal allowance. If you’ve got lots of pensions in different places, you can combine them with Monzo and add to your pension fund whenever you like.
If you have irregular income, plan ahead for quieter months. Work out your average monthly income and build up a buffer in the busy months to see you through the lean times.
Check if you're claiming everything you're entitled to. This might include marriage allowance if you're married or in a civil partnership or blind person's allowance if you're registered blind or severely sight impaired. Read up on the government’s website for more information, or speak to a tax expert for personalised guidance.
Set up separate Pots for different goals. You might want one for your emergency fund, another for tax savings if you're self-employed, and others for specific goals like holidays or home improvements. Budgeting with Pots helps you to plan ahead, and see exactly where your money's going.
UK residents only. Ts&Cs apply.
Questions? Answers.
When exactly does the new tax year start?
The new tax year starts on 6 April 2026 and ends on 5 April 2027.
Do I need to do anything?
Not automatically. But it's worth checking your tax code, using any unused ISA allowance on or before 5 April, and reviewing your financial plans for the year ahead.
How do I check my tax code?
Your tax code is on your payslip or P60 if you’re employed. You can also check it online through your HMRC personal tax account. If it looks wrong, contact HMRC to query it.
What happens to unused allowances?
Most tax allowances don't roll over. If you don't use your £20,000 ISA allowance by 5 April, you lose it. The same applies to your Personal Savings Allowance and dividend allowance - they reset every tax year.
Tax rules can change and depend on your personal circumstances. For specific advice about your situation, check the HMRC website or speak to a qualified tax adviser.