Dividend Tax: Learn how UK dividend tax rates and the Dividend Allowance affect your investments: UK Dividend Tax Guide.
Capital Gains Tax: See our complete UK Capital Gains Tax Guide for rates, allowances, and reduction strategies.
For the full PAYE, NI, and take-home planning framework, see the UK Income Tax hub.
Understanding UK income tax bands is essential for calculating your take-home pay, planning pension contributions, and making financial decisions. Here are the current rates.
2026/27 UK Income Tax Bands (England, Wales, Northern Ireland)
| Band | Taxable Income | Tax Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic Rate | £12,571–£50,270 | 20% |
| Higher Rate | £50,271–£125,140 | 40% |
| Additional Rate | Over £125,140 | 45% |
The Personal Allowance is reduced by £1 for every £2 of income above £100,000 — creating an effective 60% marginal rate between £100,000 and £125,140.
Scottish Income Tax Bands (2026/27)
Scotland sets its own income tax rates:
| Band | Taxable Income | Tax Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Starter Rate | £12,571–£14,876 | 19% |
| Basic Rate | £14,877–£26,561 | 20% |
| Intermediate Rate | £26,562–£43,662 | 21% |
| Higher Rate | £43,663–£75,000 | 42% |
| Advanced Rate | £75,001–£125,140 | 45% |
| Top Rate | Over £125,140 | 48% |
Scottish residents pay more tax on income above £26,561 and less on income below that.
Income Tax Calculation Examples
England/Wales/NI: £40,000 Salary
| Income Portion | Rate | Tax |
|---|---|---|
| First £12,570 | 0% | £0 |
| £12,571–£40,000 | 20% | £5,486 |
| Total | £5,486 | |
| Effective rate | 13.7% |
England/Wales/NI: £70,000 Salary
| Income Portion | Rate | Tax |
|---|---|---|
| First £12,570 | 0% | £0 |
| £12,571–£50,270 | 20% | £7,540 |
| £50,271–£70,000 | 40% | £7,892 |
| Total | £15,432 | |
| Effective rate | 22.0% |
England/Wales/NI: £120,000 Salary
| Income Portion | Rate | Tax |
|---|---|---|
| First £12,570 | 0% | £0 |
| £12,571–£50,270 | 20% | £7,540 |
| £50,271–£100,000 | 40% | £19,892 |
| £100,001–£120,000 (reduced PA) | 40% + PA claw-back | £12,000* |
| Total | £39,432 | |
| Effective rate | 32.9% |
*The Personal Allowance reduction creates an effective 60% rate in this band.
The £100K Tax Trap
Between £100,000 and £125,140, you lose £1 of Personal Allowance for every £2 earned. This creates the UK’s highest effective marginal rate:
| Income | Personal Allowance Lost | Effective Marginal Rate |
|---|---|---|
| £100,000 | £0 | 40% |
| £105,000 | £2,500 | 60% |
| £110,000 | £5,000 | 60% |
| £115,000 | £7,500 | 60% |
| £120,000 | £10,000 | 60% |
| £125,140 | £12,570 (all gone) | 45% |
Strategy: Pension contributions can bring your adjusted net income below £100,000, restoring your Personal Allowance and effectively giving you 60% tax relief on those contributions.
National Insurance Contributions (NICs)
In addition to income tax, employees pay National Insurance:
Employee NICs (Class 1)
| Earnings | NIC Rate |
|---|---|
| Up to £12,570 (Primary Threshold) | 0% |
| £12,571–£50,270 (Upper Earnings Limit) | 8% |
| Over £50,270 | 2% |
Employer NICs (Class 1)
| Earnings | NIC Rate |
|---|---|
| Up to £9,100 (Secondary Threshold) | 0% |
| Over £9,100 | 13.8% |
Self-Employed NICs (Class 4)
| Profits | NIC Rate |
|---|---|
| Up to £12,570 | 0% |
| £12,571–£50,270 | 6% |
| Over £50,270 | 2% |
Combined Tax + NIC Rates
Your true marginal rate combines income tax and NICs:
| Income Band | Income Tax | Employee NIC | Combined Rate |
|---|---|---|---|
| £0–£12,570 | 0% | 0% | 0% |
| £12,571–£50,270 | 20% | 8% | 28% |
| £50,271–£100,000 | 40% | 2% | 42% |
| £100,001–£125,140 | 60%* | 2% | 62% |
| Over £125,140 | 45% | 2% | 47% |
*Effective rate due to Personal Allowance withdrawal.
Take-Home Pay Examples
| Gross Salary | Income Tax | Employee NIC | Take-Home (Annual) | Take-Home (Monthly) |
|---|---|---|---|---|
| £25,000 | £2,486 | £994 | £21,520 | £1,793 |
| £30,000 | £3,486 | £1,394 | £25,120 | £2,093 |
| £40,000 | £5,486 | £2,194 | £32,320 | £2,693 |
| £50,000 | £7,486 | £2,994 | £39,520 | £3,293 |
| £60,000 | £11,432 | £3,194 | £45,374 | £3,781 |
| £75,000 | £17,432 | £3,494 | £54,074 | £4,506 |
| £100,000 | £27,432 | £3,994 | £68,574 | £5,714 |
| £150,000 | £52,932 | £4,994 | £92,074 | £7,673 |
These exclude pension contributions, student loan repayments, and any benefits.
Tax-Free Allowances and Reliefs
| Allowance | Amount | Detail |
|---|---|---|
| Personal Allowance | £12,570 | Reduced above £100K |
| Marriage Allowance | £1,260 transfer | For couples where one earns under £12,570 |
| Dividend Allowance | £500 | Tax-free dividends |
| Personal Savings Allowance | £1,000 (basic) / £500 (higher) | Tax-free savings interest |
| Capital Gains Annual Exempt | £3,000 | Tax-free capital gains |
| ISA Allowance | £20,000 | Tax-free saving/investing |
Key Takeaways
- The Personal Allowance (£12,570) means no tax on the first chunk of income
- Most people pay 28% combined (20% tax + 8% NIC) on income between £12,571 and £50,270
- The £100K–£125K trap creates a 62% effective marginal rate — pension contributions are the best way to avoid it
- Scottish taxpayers pay higher rates above £26,562 and a top rate of 48%
- Effective tax rates are always lower than marginal rates — a £50,000 earner pays about 21% overall (tax + NIC combined)
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