What this screen shows
The Tax Parameters panel shows the UK tax thresholds and rates the engine uses to calculate income tax, CGT, and other liabilities in each year of the projection. Values default to the current tax year. They can be overridden per scenario to model future changes to tax law or to apply Scottish income tax rates.
FutureClear calculates tax year by year as part of the simulation. To do this, the engine uses the tax rules configured in this panel: where the income tax bands fall, what the personal allowance is, what CGT rates apply, and so on.
How to read it
The panel shows the key values for each tax category.
Income tax
- Personal Allowance: The amount of income free of income tax. Currently £12,570. Tapers to zero for income over £100,000.
- Basic rate band: The range of income taxed at 20%. Currently £12,571 to £50,270.
- Higher rate threshold: Income above this level is taxed at 40%. Currently £50,271.
- Additional rate threshold: Income above this level is taxed at 45%. Currently £125,140.
Capital Gains Tax (CGT)
- CGT annual allowance: The amount of gains free of CGT each year. Currently £3,000.
- Basic rate (investments): CGT rate for basic rate taxpayers on investment gains. Currently 18%.
- Higher rate (investments): CGT rate for higher and additional rate taxpayers on investment gains. Currently 24%.
Other parameters
- Dividend allowance: The amount of dividend income free of tax. Currently £500.
- ISA annual allowance: The maximum ISA subscription per person per year. Currently £20,000.
- Pension annual allowance: The maximum pension contribution eligible for tax relief per year. Currently £60,000 (subject to earnings cap).
All parameters default to the current tax year values when a scenario is created. The engine applies these values uniformly across all years of the projection — it does not automatically adjust for future tax year changes. If tax thresholds change in a future Budget, existing scenarios continue to use the values set at the time they were created.
Controls
Any tax parameter in the panel can be changed. Changes apply only to the current scenario and do not affect other scenarios.
Modelling future tax changes
Tax thresholds have been frozen in nominal terms since 2021. As incomes rise with inflation, more income is pulled into higher tax bands — a process sometimes called fiscal drag. To model scenarios where thresholds are unfrozen and rise with inflation, or where bands are changed, values can be adjusted directly.
For example, to model a scenario where the personal allowance rises to £15,000, change the Personal Allowance field to £15,000. The simulation uses this threshold in its income tax calculations.
Applying Scottish income tax rates
Scottish taxpayers pay income tax at different rates and bands from those in the rest of the UK. The Scottish rates (2025/26) include additional bands:
| Band | Rate | Range |
|---|---|---|
| Starter rate | 19% | £12,571 – £14,876 |
| Basic rate | 20% | £14,877 – £26,561 |
| Intermediate rate | 21% | £26,562 – £43,662 |
| Higher rate | 42% | £43,663 – £75,000 |
| Advanced rate | 45% | £75,001 – £125,140 |
| Top rate | 48% | Over £125,140 |
For Scottish taxpayers, update the income tax band values in the tax parameter panel to reflect the Scottish rates. Scottish income tax applies only to non-savings, non-dividend income (wages, pension income, rental income). Savings income and dividends use UK-wide rates regardless of residency.
What it does not tell you
The tax parameter panel does not include every aspect of UK tax. Items handled elsewhere in the scenario:
- Pension Lifetime Allowance: The LTA was abolished in April 2024 and no longer applies.
- Marriage Allowance: Configured via the profile's marital status setting.
- State Pension triple lock escalation: Configured via the State Pension asset settings.
FutureClear's tax calculations are a projection approximation, not a definitive tax computation. Actual tax liability depends on individual circumstances and the specific rules applying in each tax year, which may differ from the parameters configured in this panel.