Reference · UK 2025/26
UK Solicitor Tax Rates 2025/26
Quick reference for the rates and thresholds that matter most to UK solicitors and law firm partners. Income tax bands, NI, corporation tax, BADR, dividend tax, FA 2014 Salaried Member rules, SRA Accounts Rules thresholds, PII minimums.
UK 2025/26 general rates
| Item | Rate / Threshold | Note |
|---|---|---|
| Personal allowance | £12,570 | Tapered above £100,000; fully removed at £125,140 |
| Basic-rate income tax | 20% | Income £12,571–£50,270 |
| Higher-rate income tax | 40% | Income £50,271–£125,140 |
| Additional-rate income tax | 45% | Income above £125,140 |
| Employee NI (basic) | 8% | Earnings £12,570–£50,270 |
| Self-employed Class 4 NI | 6% / 2% | 6% on £12,570–£50,270, 2% above. Class 2 abolished April 2024 |
| Employer NI | 15% | Earnings above £5,000/year — raised in Autumn Budget 2024 |
| Employment Allowance | £10,500 | Off employer NI bill; multi-employee firms qualify |
| Corporation tax (small profits) | 19% | Profits up to £50,000 |
| Corporation tax (main) | 25% | Profits above £250,000 |
| Corporation tax (marginal band) | Up to 26.5% | Effective marginal rate on profit £50,000–£250,000 |
| Dividend allowance | £500 | First £500 of dividends tax-free |
| Dividend tax basic / higher / additional | 8.75% / 33.75% / 39.35% | Above £500 allowance |
| CGT (basic / higher) | 18% / 24% | Aligned to residential property rate from 30 Oct 2024 |
| CGT annual exempt amount | £3,000 | |
| BADR rate (2025/26) | 14% | On qualifying gains up to £1m lifetime limit |
| BADR rate (from 6 April 2026) | 18% | +4 percentage points |
| AIA (Annual Investment Allowance) | £1,000,000 | Excludes cars, land, buildings |
| SBA (Structures and Buildings) | 3% / year | On post-29 October 2018 commercial premises spend |
| VAT registration threshold | £90,000 | Rolling 12-month basis from 1 April 2024 |
| Self-Assessment online deadline | 31 January | Following the end of the tax year |
| MTD ITSA threshold | £50,000 | From 6 April 2026 (sole-trader income above £50k). Drops to £30k in 2027 |
Legal-sector specifics
| Item | Value | Note |
|---|---|---|
| FA 2014 Salaried Member rules | Conditions A + B + C | All three must be met for LLP member to be deemed employee for tax |
| Condition A threshold | ≥80% | Disguised salary as % of total reward |
| Condition C threshold | <25% | Capital contribution as % of disguised salary |
| SRA Accounts Rules reconciliation cap | 5 weeks | Rule 8.3 maximum interval — NOT monthly |
| SRA Accountant's Report deadline | 6 months | After firm's accounting period end |
| Rule 12.2 de minimis exemption | £10,000 / £250 | Peak client money / average balance — both must be met |
| PII minimum cover (unincorporated) | £2m | Per claim, no aggregate at this level |
| PII minimum cover (incorporated) | £3m | Per claim, no aggregate at this level |
| PII run-off cover minimum | 6 years | Post-cessation under SRA Minimum Terms and Conditions |
| Section 162 incorporation relief | Defers CGT | On goodwill when unincorporated trade transferred to a company for shares |
| Goodwill amortisation (post-1 April 2019) | 6.5% / year | Tax-deductible over 15-year notional period |
Frequently asked
- What's the BADR rate change in April 2026?
- Business Asset Disposal Relief is 14% on qualifying gains in 2025/26 (up to £1m lifetime limit). From 6 April 2026 the rate rises to 18%. On the full £1m limit that's £40,000 of additional CGT. For partners planning sale or retirement, the rate change is a real timing variable.
- Are LLPs subject to corporation tax?
- No. LLPs are tax-transparent for income tax — members are taxed personally on their share of profit. The LLP itself doesn't file a corporation tax return. Same treatment as a general partnership; the LLP's separate legal personality gives liability protection but doesn't create a separate tax person.
- What's the current VAT threshold for legal services?
- £90,000 of taxable turnover on a rolling 12-month basis (raised from £85,000 on 1 April 2024). Legal services including conveyancing are standard-rated at 20% — NOT exempt. Many consultant solicitors register voluntarily below the threshold to reclaim input VAT on costs.
Want these applied to your firm?
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