For the current tax year, taxpayers with adjusted net income between £100,000 and £125,140 will face an effective marginal tax rate of 60%, as their £12,570 tax-free personal allowance is gradually withdrawn.

If a taxpayer earns over £100,000 in any tax year, their personal allowance is gradually reduced by £1 for every £2 of adjusted net income exceeding £100,000. This ceiling applies regardless of age, meaning that any taxable receipt that pushes their income above this threshold will lead to a reduction in their personal tax allowances. If their adjusted net income reaches £125,140 or more, the personal Income Tax allowance will be reduced to zero.

Adjusted net income refers to a taxpayer’s total taxable income before personal allowances, minus certain tax reliefs such as trading losses, charitable donations, and pension contributions.

Taxpayers in this income band should consider financial planning strategies to avoid this "personal allowance trap." Reducing income below £100,000 could be achieved by utilising options like increasing pension contributions, making charitable donations, or participating in certain investment schemes.

For higher-rate or additional-rate taxpayers seeking to reduce their tax bill, gifting to charity is one strategy. Donations made in the current tax year can be carried back to the 2024-25 tax year, provided the taxpayer requests the carry-back before or at the same time as submitting their self-assessment return, but no later than 31 January 2026.

Married couples and civil partners could save up to £252 a year by transferring part of one partner’s unused personal allowance to the other, but you may need to cancel the claim if your income or relationship status changes.

The Marriage Allowance applies to married couples and civil partners where one partner does not pay tax or does not pay tax above the basic rate threshold for Income Tax (i.e., one partner must earn less than the £12,570 personal allowance for 2025-26).

The allowance allows the lower-earning partner to transfer up to £1,260 of their unused personal tax-free allowance to their spouse or civil partner. The transfer can only be made if the recipient (the higher-earning partner) is taxed at the basic 20% rate, which typically means they have an income between £12,571 and £50,270. For those living in Scotland, this would usually apply to an income between £12,571 and £43,662.

By using the allowance, the lower-earning partner can transfer up to £1,260 of their unused personal allowance, which could result in an annual tax saving of up to £252 for the recipient (20% of £1,260).

However, it is important to be aware you must cancel the Marriage Allowance if your circumstances change and any of the following apply:

• your relationship ends – because you have divorced, ended (‘dissolved’) your civil partnership or legally separated;
• your income changes and you are no longer eligible; or
• you no longer want to claim.

If your income exceeds £60,000 and you or your partner receive Child Benefit, you can now choose to pay the High Income Child Benefit Charge through your PAYE code instead of filing a Self-Assessment return; a simpler way to stay compliant while keeping your Child Benefit claim active.

The High Income Child Benefit Charge (HICBC) is a charge that applies to parents whose income exceeds £60,000 in a tax year and whose family receive Child Benefit. The charge is calculated at a rate of 1% of the full Child Benefit amount for every £200 of income between £60,000 and £80,000. Once income exceeds £80,000, the charge equals the full amount of Child Benefit received effectively removing any financial gain from claiming it.

Taxpayers now have the option to report their Child Benefit payments and pay the HICBC directly through their PAYE tax code, rather than filing a Self-Assessment tax return. This change was announced in the Autumn Statement 2024 and has recently been made available to eligible taxpayers.

The tax charge can be collected through PAYE if:

• the individual is not required to file a self-assessment tax return for any other reason (for example, if they are self-employed), and
• the payment arrangement is made before 31 January following the end of the relevant tax year.

If these conditions are not met, the HICBC must be paid through self-assessment instead.

Taxpayers can choose whether to continue receiving Child Benefit and pay the charge or opt out of receiving it to avoid the charge altogether. It is usually beneficial to claim Child Benefit as doing so can safeguard certain benefits and ensure your child receives a National Insurance number at age 16.

Many people rely on state benefits, but it is not always obvious which payments are taxable and which are tax-free.

HMRC’s guidance outlines the following list of the most common state benefits on which Income Tax is payable, subject to the usual limits:

• Bereavement Allowance (previously Widow’s Pension)
• Carer’s Allowance or (in Scotland only) Carer Support Payment
• Contribution-Based Employment and Support Allowance (ESA)
• Incapacity Benefit (from the 29th week you receive it)
• Jobseeker’s Allowance (JSA)
• Pensions Paid by the Industrial Death Benefit Scheme
• The State Pension
• Widowed Parent’s Allowance

The most common state benefits that are not subject to Income Tax include:

• Attendance Allowance
• Bereavement Support Payment
• Child Benefit (income-based – use the Child Benefit tax calculator to see if you’ll have to pay tax)
• Disability Living Allowance (DLA)
• Free TV Licence for Over-75s
• Guardian’s Allowance
• Housing Benefit
• Income Support – though you may have to pay tax on Income Support if you’re involved in a strike
• Income-Related Employment and Support Allowance (ESA)
• Industrial Injuries Benefit
• Lump-Sum Bereavement Payments
• Maternity Allowance
• Pension Credit
• Personal Independence Payment (PIP)
• Severe Disablement Allowance
• Universal Credit
• War Widow’s Pension
• Winter Fuel Payments and Christmas Bonus

As of April 2025, directors of close companies and self-employed taxpayers face new mandatory reporting requirements on their Self-Assessment returns.

Up to 900,000 company directors and 1.2 million taxpayers carrying on a trade will be impacted by new rules that require them to provide more information when filing their 2025-26 self-assessment returns.

Legislation has been enacted that introduces mandatory reporting obligations for certain taxpayers, including those who begin or cease trading and directors of close companies. These measures came into effect on 5 April 2025 and apply for the current 2025-26 tax year and later tax years.

Company directors of close companies will face new reporting requirements. Most small private companies will meet the definition of a close company and there are some specific tax rules that apply to these companies. From 5 April 2025, taxpayers impacted by the change must confirm whether they are directors of a close company and provide further details, including the company’s name and registered number, the value of dividends received and their percentage shareholding in the company. If shareholding changes during the year, the highest percentage held must be reported. Answering these questions will be mandatory when submitting 2025-26 tax returns and beyond.

The new rules also introduce a mandatory requirement to report the start or cessation of a trade that was previously a voluntary requirement. Taxpayers are now required to include the date of commencement or cessation of their business in their tax return, whether for personal tax, partnerships or trustees. This change applies to tax returns for 2025-26 and beyond.