1. What Changes in 2026? (Key Updates)

The Chancellor's Budget is a balancing act between raising revenue and maintaining stability. As we approach the new tax year in April 2026, three major factors will directly impact your wallet.

① Income Tax Threshold Freeze & "Fiscal Drag"
The most significant impact comes from what you don't see. While the headline tax rates haven't hiked, the income thresholds (the point where you start paying tax) remain frozen until 2028. As your salary increases with inflation, you may be pushed into a higher tax bracket. This phenomenon, known as "Fiscal Drag," effectively means you pay more tax in real terms.

② Changes to National Insurance (NI)
A major talking point is the increase in Employer National Insurance contributions. While this is not deducted directly from your payslip, it increases the cost of hiring for businesses. This often leads to lower salary increases or hiring freezes, indirectly affecting your future earning potential and negotiation power.

③ National Living Wage Increase
There is good news for lower earners. The National Living Wage is set to increase to keep pace with the cost of living. This will directly boost the take-home pay for those on hourly wages or entry-level salaries.

2. Is Your Tax Code Correct? (Understanding 1257L)

To understand your payslip, you must understand your Tax Code. This code tells your employer how much tax to deduct.

The Standard Code: 1257L
Currently, the most common code in the UK is '1257L'. This means you have a tax-free Personal Allowance of £12,570 per year. Because this allowance is frozen, your tax-free income does not grow with inflation.

• Why Check? If your code is not 1257L, make sure you know why. It could be due to company benefits (like a company car or medical insurance) or a mistake by HMRC.
• The Impact: An incorrect code means you could be overpaying tax or building up a debt to HMRC that you will have to pay back later.

3. Why You Must Check Now (Financial Planning)

Many people wait until they receive their April payslip to panic. However, now is the golden time to review your finances before the new tax year begins.

Instead of just complaining about taxes, take proactive steps. For example, increasing your Pension Contributions via a 'Salary Sacrifice' scheme can be a smart way to lower your taxable income while saving for the future, effectively mitigating the impact of the frozen thresholds.

4. Essential UK Tax Resources

UK tax laws can be complicated. Don't guess—use these official tools to check your status and calculate your take-home pay.