Tax-year 2026/27 for UK locums: every change you need to know

The 2026/27 tax year is the noisiest UK tax year locums have seen since the pandemic. Dividend rates jumped, fresh MTD penalties landed, threshold freezes got extended again, and employer NI is now feeding through to bank and agency rates. Here is what actually changed, with sources.

If you are a sole trader, run a personal service company, work via PAYE bank, or do all three in the same week, this is the post. We have verified every number against gov.uk.

What changes from 6 April 2026

The headline changes for locums:

• Dividend ordinary and upper rates rise by 2 percentage points. Now 10.75% and 35.75% (from 8.75% and 33.75%). Additional rate stays at 39.35%.
• Class 2 voluntary rate rises to £3.65/week (from £3.50). Class 3 voluntary rises to £18.40/week.
• MTD for Income Tax goes live for sole traders and landlords with gross trading or property income above £50,000. A new points-based late-submission penalty regime starts the same day.
• Personal allowance and tax thresholds frozen for three more years, now until 2030/31 (Autumn Budget 2025).
• Employer secondary threshold of £5,000 confirmed frozen through to April 2031. Locum agency rates have already absorbed the 15% employer NI hit from April 2025 and are not coming back.
• Mandatory payrolling of benefits in kind still scheduled to start 6 April 2026 for most BiKs (loans and accommodation excluded for now).

National Insurance rates for 2026/27

Class 4 (sole-trader profits)

• 6% on profits between £12,570 and £50,270.
• 2% on profits above £50,270.
• Thresholds frozen until 2030/31.

Class 2 (sole trader)

• Compulsory Class 2 abolished for self-employed earning above the Small Profits Threshold (SPT) since 6 April 2024. You still get a qualifying year for state pension purposes automatically.
• SPT for 2025/26 is £6,845. It is £6,845 for 2026/27 too (frozen). If your profits are below it, you can pay voluntary Class 2 at £3.65/week in 2026/27 to protect your state pension record.

Class 1 employee (PAYE bank, agency PAYE)

• 8% on earnings between the primary threshold (£12,570/year) and upper earnings limit (£50,270/year).
• 2% above £50,270.

Class 1 employer (matters even if you do not employ)

• 15% main rate (raised from 13.8% on 6 April 2025).
• Secondary threshold £5,000/year (cut from £9,100 on 6 April 2025), frozen until April 2031.

This is why agency PAYE rates and umbrella margins have stayed compressed.

Personal allowance and tax thresholds

• Personal allowance: £12,570. Frozen.
• Basic rate (20%): £12,571 to £50,270. Frozen.
• Higher rate (40%): £50,271 to £125,140. Frozen.
• Additional rate (45%): above £125,140. Frozen.

The Autumn Budget 2025 extended the freeze on the personal allowance, higher rate threshold and additional rate threshold to 2030/31. It was previously due to thaw in 2028/29.

Mandatory payrolling of benefits in kind

If you employ anyone (e.g. a practice manager spouse via your Ltd, or a clinical assistant for a private clinic), this matters.

• From 6 April 2026, most taxable benefits in kind must be reported through payroll in real time. P11D ends for those benefits.
• Two exceptions are excluded for now: employment-related loans and living accommodation. Voluntary payrolling is available for those from April 2026 and HMRC will mandate them later.
• Class 1A NIC continues for most BiKs, paid via payroll instead of after the year end.

If you only run a one-director Ltd with no benefits, no action needed. If you give a spouse a company phone or private medical cover, your payroll software needs to be set up before the first 2026/27 pay run.

IR35 reminder for healthcare

The off-payroll working rules have not changed in 2026/27, but the practical position for locums is worth restating:

• NHS trust shifts: the trust is the end client, so the trust (or the agency in the chain) makes the IR35 status determination. Most direct trust shifts continue to be inside IR35, taxed at source.
• GP practice locum work: practices below the Companies Act small-company test are not in scope, so determination defaults back to you and your Ltd. After SI 2024/1303, the small-company thresholds are £15m turnover, £7.5m balance sheet, 50 staff (any two of three). Almost every standalone GP practice clears that test as small.
• Private clinic, self-pay, MSK direct contracts: usually outside scope or determined by you.

The smart move for hybrid locums is the same as it has been: keep clear contract trails, status determination statements, and a working pattern that is genuinely contracted rather than rota-managed. CEST is still HMRC's tool of record.

Mileage and expenses

• 45p per mile for the first 10,000 business miles in a car or van.
• 25p per mile thereafter.
• 5p per mile extra per business passenger you carry.
• 24p per mile for motorbikes, 20p per mile for bicycles.

These rates have been unchanged since 2011.

Pension and dividend allowances

Pension annual allowance

• £60,000 standard annual allowance.
• Carry forward unused allowance from the previous three tax years if you were a pension scheme member.
• Tapered allowance kicks in at £260,000 adjusted income, down to a £10,000 floor at £360,000.
• Money Purchase Annual Allowance (MPAA) stays at £10,000 once triggered, with no carry forward.

Dividend allowance and rates

• Dividend allowance: £500 (unchanged since April 2024).
• Ordinary rate: 10.75% (was 8.75%).
• Upper rate: 35.75% (was 33.75%).
• Additional rate: 39.35% (unchanged).

This is the change that matters most for limited-company locums. On a typical £40,000 dividend after a £12,570 salary, the extra 2 percentage points cost you roughly £750 a year. Worth running a numbers exercise on the salary/dividend split for 2026/27.

Other allowances unchanged

• Trading allowance: £1,000 gross.
• Property allowance: £1,000 gross.
• Personal Savings Allowance: £1,000 (basic rate), £500 (higher rate), £0 (additional rate).
• CGT rates: 18% / 24% (post 30 October 2024 changes), unchanged in Autumn Budget 2025.
• CGT annual exempt amount: £3,000.
• VAT registration threshold: £90,000. Healthcare services to patients are usually exempt under VAT Notice 701/57, so this rarely bites unless you do significant non-clinical work (e.g. medico-legal, training).
• HICBC: starts £60,000, fully clawed back at £80,000.

Self Assessment and MTD reminder

If your gross trading or property income is over £50,000, MTD for Income Tax applies to you from 6 April 2026.

The threshold drops to £30,000 from April 2027, and to £20,000 from April 2028.

New penalty regime

• Late submission: 1 point per missed quarterly update or final declaration. At 4 points, a flat £200 penalty, then £200 for each further miss.
• Soft landing: no penalty points for the first four quarterly updates if you join MTD in April 2026.
• Late payment: from day 15, 3% of unpaid tax; another 3% from day 30; 10% per annum daily from day 31.

FAQ

I work via my Ltd and through agency PAYE on the same week. Anything new for 2026/27? Two things. The dividend hike means your Ltd profit extraction is more expensive. Re-run your salary/dividend split. Your agency PAYE rate is unlikely to rise much because the agency is absorbing 15% employer NI from £5,000 of earnings.

Do I need MTD if my self-employed locum income is £40,000? Not in 2026/27. You join from 6 April 2027, when the threshold drops to £30,000.

Is Class 2 dead? Compulsorily, yes. Voluntarily, no. If your profits are under £6,845 and you want a qualifying year for state pension, pay £3.65/week voluntarily in 2026/27.

Has anything changed for VAT? No. The threshold is £90,000 and most clinical work to patients is VAT exempt under VAT Notice 701/57.

Sources

• Self-employed National Insurance rates (gov.uk)
• Rates and thresholds for employers 2025 to 2026 (gov.uk)
• Income tax rates and personal allowance (gov.uk)
• Changes to tax rates for property, savings & dividend income (gov.uk)
• Reporting and paying income tax and Class 1A NICs on benefits in kind in real time (gov.uk)
• Penalties for Making Tax Digital for Income Tax (gov.uk)
• Tax on your private pension contributions: annual allowance (gov.uk)
• How VAT works: VAT thresholds (gov.uk)
• Understanding off-payroll working (IR35) (gov.uk)
• SI 2024/1303 (Companies Act size threshold uplift)