UK Income Tax Bands 2025/26: How Each Rate Applies to Your Salary

Ask most people what tax rate they pay and they will give you a single number: 20%, or 40% if they earn more. That answer misses how income tax actually works. You do not pay one rate on all your income. You pay different rates on different slices of it, and understanding where each rate kicks in tells you far more about your actual tax bill than a single percentage ever could.

The 2025/26 tax year runs from 6 April 2025 to 5 April 2026. The bands and personal allowance have been frozen in place since 2022, and will remain frozen until at least April 2028. That freeze, while not a rate rise, means more people are being pulled into higher tax bands each year as wages grow. Use our UK salary calculator to see exactly how these rates apply to your own earnings.

The personal allowance and why it matters first

Before any income tax is charged, you have a personal allowance. For 2025/26 that is £12,570. This is the amount of income you can earn each year completely free of income tax. It applies to everyone with a UK tax residency by default, regardless of whether income comes from employment, self-employment, pensions, or rental income.

The personal allowance sounds simple but it has two important wrinkles. First, it is withdrawn for high earners. Above £100,000 of adjusted net income, the personal allowance is reduced by £1 for every £2 of income above that threshold. By the time income reaches £125,140, the entire personal allowance has been removed. This creates a particularly punishing effective tax rate between £100,000 and £125,140, which is discussed below.

Second, the allowance is delivered through your tax code. The standard tax code for 2025/26 is 1257L, which tells your employer to give you £12,570 of tax-free income before deducting anything. If your tax code is different from this, there is usually a reason: unpaid tax from a previous year, untaxed income from a second job, or a benefit in kind such as a company car. Checking your tax code takes two minutes and can save you overpaying for months.

Basic rate, higher rate and additional rate in plain terms

The basic rate band runs from £12,571 to £50,270. Every pound of income in this range is taxed at 20%. On a salary of exactly £50,270, you pay 20% on the £37,700 above your personal allowance, which comes to £7,540 in income tax. Nothing you earn up to this point is taxed at a higher rate, no matter what anyone tells you at the office.

The higher rate of 40% starts at £50,271. This is where people sometimes panic and think they will lose nearly half of their entire salary to tax. That is not how it works. The 40% rate applies only to the portion of income above £50,270. If you earn £60,000, you pay 20% on the slice from £12,571 to £50,270 and 40% on the £9,730 above that. Your total income tax bill is approximately £11,432, which is an effective rate of around 19% on the full £60,000.

The additional rate of 45% applies above £125,140. Very few employees reach this point, but for those who do, the combination of the 45% rate and the lost personal allowance means that income between £100,000 and £125,140 carries an effective marginal rate of 60%. This is a genuine quirk of the system: someone earning £110,000 faces a higher effective rate on that income than someone earning £200,000 does on theirs above the additional rate threshold.

Scotland's five-band income tax system

Scotland has had the power to set its own income tax rates and bands since 2017, and it has exercised that power substantially. In 2025/26, Scotland has five income tax bands compared to England's three. Scottish taxpayers pay starter rate (19%), basic rate (20%), intermediate rate (21%), higher rate (42%) and top rate (48%).

The Scottish higher rate threshold is £43,662 compared to £50,270 in England. That gap means a Scottish employee earning £50,000 pays noticeably more income tax than an equivalent earner in England or Wales. On a £50,000 salary the difference is roughly £1,600 per year in extra income tax for a Scottish taxpayer. Higher earners see the gap widen further because the Scottish top rate of 48% compares to 45% south of the border.

One thing Scotland cannot change is tax on dividends and savings interest. Those are reserved taxes and remain at UK-wide rates regardless of where you live. A limited company director in Edinburgh pays the same dividend tax rates as one in London. The difference applies only to non-savings, non-dividend income from employment, self-employment, and pensions. If you receive dividends, our dividend tax calculator handles the UK-wide rules correctly regardless of which nation you are in.

How PAYE collects income tax through your payslip

Pay As You Earn (PAYE) is the system employers use to deduct income tax and National Insurance before you receive your salary. Every month your employer calculates how much tax you owe on a cumulative basis, comparing what you have earned year-to-date against what you should have paid, and deducting the difference. This means your tax is broadly evened out across the year even if your pay fluctuates.

Your tax code tells your employer how to calculate the deduction. Code 1257L means you receive one-twelfth of your personal allowance each month before tax applies. If you start a new job part-way through the year, your employer may not have received your P45 in time. In this situation an emergency tax code is applied: W1 (week 1) or M1 (month 1). An emergency code treats each pay period in isolation rather than cumulatively, which can result in over-taxation during the transition. HMRC corrects this automatically once it reconciles your records at the end of the tax year, but you can also call HMRC or update your details online to speed up the correction.

PAYE settles the income tax for most employed people without needing to submit a self-assessment return. You only need to file a return if you have other income sources, earn above £100,000, have income from overseas, or have untaxed income such as freelance earnings. In those cases, PAYE handles the employment portion but you report the rest yourself.

Fiscal drag and the real impact of frozen thresholds

Income tax thresholds have been frozen since April 2022 and will remain frozen until April 2028. The personal allowance stays at £12,570, the higher rate threshold stays at £50,270, and the additional rate threshold stays at £125,140. The bands do not move even when wages and prices rise.

This creates what economists call fiscal drag. As wages grow with inflation, more of each pound earned crosses into higher tax bands. Someone who earned £45,000 in 2022 and has received two rounds of pay rises may now earn £52,000, crossing the higher rate threshold and paying 40% on the top slice of their income. Their effective tax burden has risen not because tax rates changed, but because their wages grew while the bands stayed still.

The Office for Budget Responsibility estimated that the threshold freeze will pull approximately 3.2 million more people into the higher rate band between 2022 and 2028. That is a very large number of workers whose take-home pay is growing more slowly than their gross pay would suggest. Understanding where you sit relative to the thresholds, and whether a pay rise might tip you across one of them, is genuinely useful planning information rather than abstract tax theory.

National Insurance and how it works alongside income tax

Income tax and National Insurance are separate deductions, but they are both collected through PAYE and both reduce your take-home pay in the same transaction. For employees in 2025/26, the main rate of NI is 8% on earnings between £12,570 and £50,270, and 2% above £50,270. There is no NI-free personal allowance equivalent; NI starts from the primary threshold of £12,570.

Adding income tax and NI together gives a more realistic picture of what your employer's decision to pay you one more pound actually costs you. In the basic rate band, a pound of gross pay costs you 20p in income tax and 8p in NI, leaving 72p. In the higher rate band above £50,270, each additional pound costs 40p in income tax and 2p in NI, leaving 58p. Combine that with the effect of the frozen thresholds and you can see why take-home pay growth has lagged behind headline wage growth for so many employees over recent years.