The results of Rachel Reeves’ November budget that will affect your payroll from April 2026 are as follows:
* Income Tax: The thresholds at which the different band of Income Tax kick in will be frozen until 2031.
* National Insurance: The Lower Earnings Limit will increase from £125 to £129 per week. All other thresholds and rates remain unchanged until 2031.
* National Living Wage: This will increase by 50 pence (4.1%) to £12.71 per hour form April for employees aged 21 and over.
The rate for 18-20 year olds will increase 8.5% to £10.85 per hour.
The rate for 16-17 year olds and apprentices increases from £7.55 to £8.00 per hour.
* Dividends: The current Dividend Allowance of £500 remains for 2026-27 but there will be a 2 percentage point rise to the ordinary and upper tax rates on dividend income from April. The additional rate remains unchanged at 39.35%. Dividends received above the Dividend Allowance will be taxed at the following tax rates for 2026-27:
* 10.75% for basic rate taxpayers
* 35.75% for higher rate taxpayers
* 39.35% for additional rate taxpayers
Dividends within the allowance still count towards an individual’s basic or higher rate band and so may affect the rate of tax paid on dividends above the allowance. Dividends are treated as the last type of income to be taxed.
