UK Income Tax Bands and Personal Allowance

UK income tax is band-based. Above the Personal Allowance, each band applies a different rate to the slice of income that falls within it. Understanding which band each part of income lands in is the foundation for predicting net pay, planning pension contributions, and deciding whether a salary sacrifice or bonus deferral makes sense for a given household.

This guide covers the 2026/27 figures, the practical mechanics of how PAYE applies the bands month by month, the Scottish six-band structure, and worked examples at five income levels from minimum wage to the additional rate. The Welsh and Northern Irish rates currently match England and are covered with the main UK figures.

The 2026/27 income tax bands at a glance

For 2026/27 the income tax bands in England, Wales and Northern Ireland are: Personal Allowance of GBP 12,570 (0%), basic rate of 20% from GBP 12,571 to GBP 50,270, higher rate of 40% from GBP 50,271 to GBP 125,140, and additional rate of 45% above GBP 125,140. The Personal Allowance is reduced by GBP 1 for every GBP 2 of adjusted net income above GBP 100,000 and is fully withdrawn at GBP 125,140.

The figures have been frozen since 2021/22 and are scheduled to remain frozen until April 2028 following the extension confirmed in successive Budgets. The intended effect, known as fiscal drag, is to pull a growing proportion of taxpayers into higher bands without changes to the headline rates. The Office for Budget Responsibility estimated in March 2024 that around 4 million additional taxpayers would be pulled into higher bands over the freeze period.

The basic rate band is GBP 37,700 wide (GBP 50,270 less the GBP 12,570 allowance). The higher rate band is GBP 74,870 wide (GBP 125,140 less GBP 50,270). Above GBP 125,140 the additional rate applies without ceiling. Income tax sits separately from National Insurance, which uses similar thresholds but different rates and a different basis (no equivalent of the Personal Allowance taper, for instance).

Income tax is charged under the Income Tax Act 2007, with annual rates and thresholds set in Finance Acts. The framework distinguishes non-savings income (mainly salary, self-employment, pension and rental), savings income (interest), and dividend income, each with its own rate structure layered on top of the band system.

Worked examples at five income levels

Example one: GBP 18,000 salary. Personal Allowance covers GBP 12,570. Taxable income is GBP 5,430 at 20% = GBP 1,086. Net of income tax: GBP 16,914. National Insurance at 8% on the same GBP 5,430 = GBP 434. After both, take-home before pension or other deductions is GBP 16,480 a year, GBP 1,373 a month.

Example two: GBP 35,000 salary. Personal Allowance GBP 12,570. Taxable income GBP 22,430 all at 20% = GBP 4,486. NI at 8% on the same band = GBP 1,794. Take-home GBP 28,720 a year, GBP 2,393 a month before pension contributions.

Example three: GBP 60,000 salary. Tax: GBP 37,700 at 20% (GBP 7,540) and GBP 9,730 at 40% (GBP 3,892), totalling GBP 11,432. NI: GBP 37,700 at 8% (GBP 3,016) and GBP 9,730 at 2% (GBP 195), totalling GBP 3,211. Take-home GBP 45,357 a year, GBP 3,780 a month.

Example four: GBP 110,000 salary. Personal Allowance reduced by GBP 5,000 (half of GBP 10,000 above GBP 100,000) to GBP 7,570. Tax: GBP 37,700 at 20% (GBP 7,540) and GBP 64,730 at 40% (GBP 25,892), totalling GBP 33,432. NI: GBP 37,700 at 8% plus GBP 59,730 at 2% (GBP 1,195) plus the band - total NI GBP 4,211. Take-home GBP 72,357 a year. Marginal rate on the next GBP 1 of salary up to GBP 125,140 is 60% income tax plus 2% NI = 62%.

Example five: GBP 200,000 salary. Personal Allowance fully withdrawn. Tax: GBP 37,700 at 20%, GBP 87,440 at 40%, GBP 74,860 at 45% = GBP 76,109. NI: GBP 37,700 at 8% plus GBP 149,730 at 2% = GBP 6,011. Take-home GBP 117,880 a year, GBP 9,823 a month before pension or salary sacrifice.

How PAYE applies the bands month by month

PAYE annualises the band structure across 12 monthly pay periods (or 52 weekly periods). On a 1257L cumulative code, each month the employer calculates year-to-date taxable pay against year-to-date allowance and band capacity, and deducts the tax that brings the year-to-date deduction to the correct cumulative total. A pay run that produces a small refund is normal mid-year for any taxpayer whose pay drops in a month (such as after a bonus settles).

Worked example: an employee on GBP 36,000 salary in equal monthly pay of GBP 3,000 has GBP 1,047.50 of allowance and GBP 3,141.67 of basic-rate band capacity per month. Each month: GBP 3,000 less GBP 1,047.50 = GBP 1,952.50 taxable, at 20% = GBP 390.50 income tax. The annualised total of GBP 4,686 matches the year-end calculation.

A bonus month tilts the calculation. The same employee receiving a GBP 10,000 bonus in March (final pay month of the tax year) would have total annual pay of GBP 46,000. Year-end tax is (46,000 - 12,570) * 20% = GBP 6,686. The bonus month's tax run applies the residual band capacity at 20% and produces a tax deduction of around GBP 2,000 in that month, with the cumulative balance keeping the year-end total right.

Where a bonus pushes the year-to-date past a band threshold (into higher or additional rate), the bonus month applies the higher rate on the slice above the threshold. This is the source of the common complaint that a bonus is taxed at 50% or 60%: the employee sees a single month with high marginal deduction, but the annualised position is the standard band structure.

Personal Allowance taper and the 60% effective band

The Personal Allowance taper in section 35(3) of the Income Tax Act 2007 reduces the GBP 12,570 allowance by GBP 1 for every GBP 2 of adjusted net income above GBP 100,000. The allowance is fully withdrawn at GBP 125,140. Between those two figures the effective marginal rate is 60%: 40% on the income itself plus 40% on the lost allowance for every GBP 2 of extra income.

Adjusted net income is total taxable income less grossed-up Gift Aid donations and gross pension contributions. Salary sacrifice and personal pension contributions are the standard routes to manage the taper. A GBP 5,000 net personal pension contribution becomes a GBP 6,250 gross contribution after basic-rate relief at source, reducing adjusted net income by GBP 6,250 and restoring GBP 3,125 of Personal Allowance for a high earner caught in the taper.

Worked example: a higher-rate earner on GBP 115,000 has adjusted net income of GBP 115,000 less their tax-relieved pension contributions. With no contributions, they lose GBP 7,500 of allowance (half of the GBP 15,000 above GBP 100,000), reducing it to GBP 5,070. Tax on the GBP 109,930 taxable income is GBP 37,700 at 20% plus GBP 72,230 at 40% = GBP 36,432. Adding GBP 15,000 gross to a pension via salary sacrifice would bring adjusted net income to GBP 100,000, restore the full allowance, and reduce tax by approximately GBP 9,000.

The 60% effective band makes the GBP 100,000 to GBP 125,140 range the most actively planned-around in personal tax. Pension contributions, Gift Aid, bonus sacrifice schemes and Share Incentive Plans are all used to reduce adjusted net income. The PSA reduction at GBP 50,270 (PSA drops from GBP 1,000 to GBP 500) and the dividend tax rate change are smaller secondary effects in the same band region.

Scotland: six bands and the rate divergence

Scotland operates separate income tax rates and bands on non-savings non-dividend income under the Scotland Act 2016. For 2025/26 (and broadly continuing into 2026/27 unless changed by the Scottish Budget): starter rate 19% on GBP 12,571 to GBP 15,397, basic rate 20% to GBP 27,491, intermediate rate 21% to GBP 43,662, higher rate 42% to GBP 75,000, advanced rate 45% to GBP 125,140, top rate 48% above GBP 125,140.

Savings interest and dividends for Scottish taxpayers use UK rates and the UK band structure: this is the most common point of confusion. A Scottish taxpayer with GBP 60,000 of salary and GBP 5,000 of bank interest pays Scottish rates on the salary and UK rates (including PSA) on the interest.

Worked example: a Scottish taxpayer on GBP 60,000 salary. Personal Allowance GBP 12,570. Starter rate 19% on GBP 2,827 = GBP 537. Basic rate 20% on GBP 12,094 = GBP 2,419. Intermediate rate 21% on GBP 16,171 = GBP 3,396. Higher rate 42% on GBP 16,338 = GBP 6,862. Total income tax GBP 13,214. The same earnings in England would attract GBP 11,432 of tax, a difference of around GBP 1,782 of additional Scottish tax.

Scottish taxpayer status applies where a person has a sole or main place of residence in Scotland for most of the tax year. HMRC determines the status from address records and issues an S-prefix tax code. Welsh taxpayer status uses a C prefix; Welsh Rates of Income Tax currently match England and Northern Ireland exactly, producing identical tax outcomes despite the separate machinery.

How bands interact with savings and dividend income

The band structure sets the rate for non-savings non-dividend income first. Savings interest sits next on the tower, with the Personal Savings Allowance (GBP 1,000 basic, GBP 500 higher, nil additional) covering the first slice of interest, then taxed at the band rate that applies to the income level. Dividend income sits at the top of the tower, with the GBP 500 dividend allowance and dividend rates of 8.75%, 33.75%, and 39.35%.

Worked example: a taxpayer with GBP 45,000 salary, GBP 1,200 of bank interest, and GBP 3,000 of dividends. Salary stacks: GBP 12,570 PA, GBP 32,430 at 20% = GBP 6,486. Interest: GBP 1,000 PSA, GBP 200 at 20% (still basic rate at this stack level) = GBP 40. Dividends stack from GBP 46,200: GBP 4,070 of basic-rate capacity remains; dividend allowance GBP 500, then GBP 2,500 dividends at 8.75% = GBP 219 (all within basic rate). Total tax GBP 6,745.

Where the stack pushes part of dividend income into the higher band, the higher dividend rate (33.75%) applies only to the slice above GBP 50,270. A taxpayer just below the threshold with a large dividend can have part of the same dividend at 8.75% and part at 33.75%.

Edge case: ISA income sits entirely outside this stack. Interest, dividends and gains within an ISA do not enter the band calculation and do not need to be declared. For a taxpayer near the GBP 50,270 threshold, moving investments into the ISA wrapper avoids the band-tipping effect even where the actual tax saved is small.

Pension contributions and band-shifting

Personal and workplace pension contributions reduce adjusted net income and can shift a taxpayer between bands. A higher-rate earner contributing GBP 8,000 net to a personal pension receives GBP 2,000 of basic-rate relief at source (gross GBP 10,000), with a further GBP 2,000 claimed through Self-Assessment or PTA for the higher-rate slice. The net cost of the GBP 10,000 contribution is GBP 6,000 to a higher-rate taxpayer.

Salary sacrifice operates differently. The employee gives up GBP 10,000 of salary in exchange for an employer pension contribution of GBP 10,000 (plus a share of the saved employer NI in better schemes). The salary reduction comes off the top of pay, removing the highest-rate income tax and NI on the sacrificed amount and increasing the gross pension contribution without further claim.

Worked example: a higher-rate employee on GBP 60,000 sacrifices GBP 5,000 of salary into pension. New gross salary GBP 55,000, with the GBP 5,000 going into the pension as employer contribution. The employee saves GBP 5,000 at 40% income tax (GBP 2,000) and 2% NI (GBP 100), totalling GBP 2,100 of personal savings. The employer also saves 13.8% NI on the GBP 5,000 (GBP 690); good schemes pass some or all back into the pension.

Edge case: the Annual Allowance for tax-relieved pension contributions is GBP 60,000 a year. Higher earners face a tapered Annual Allowance reducing GBP 1 for every GBP 2 of adjusted income above GBP 260,000, to a minimum of GBP 10,000 above GBP 360,000. Carry-forward of unused allowance from the prior three tax years is permitted under section 228A Finance Act 2004, expanding the room for one-off larger contributions.

Reading the bands on a payslip

A standard payslip shows gross pay, income tax, NI and any other deductions for the pay period plus year-to-date totals. The tax code (typically 1257L for England, S1257L for Scotland, C1257L for Wales) sets the allowance the employer applies month by month. A pay period that produces no tax usually means year-to-date pay is below the cumulative allowance threshold.

Year-to-date figures matter most for high earners and anyone whose pay varies. The cumulative method means a single high-pay month does not over-tax: the employer applies the year-to-date band capacity and corrects in the next pay run if the position changes. The exception is emergency tax codes ending in W1 or M1, which apply month-by-month without cumulative correction.

Worked example: a new starter joins in November on GBP 60,000 (GBP 5,000 per month), with no prior PAYE in the year. The cumulative position at month 8 (November) is GBP 8,380 of allowance used and GBP 25,133 of basic-rate capacity available out of the proportional year-to-date totals. The first pay run applies a large refund-like calculation, potentially producing very little tax in November because the year-to-date band capacity has been built up without prior use.

Practical action: checking the year-to-date totals on the January or February payslip against the expected annual tax (rough calculation) catches coding errors early. Where the year-to-date tax is materially different from the annualised projection, the Personal Tax Account is the route to query and correct.

Frequently asked questions

What income tax do I pay on GBP 30,000 in 2026/27?

GBP 3,486 in income tax. Personal Allowance of GBP 12,570 leaves GBP 17,430 taxable, all at the basic rate of 20%. National Insurance at 8% on the same GBP 17,430 adds GBP 1,394. Total deductions GBP 4,880 leave a net annual figure of GBP 25,120, or GBP 2,093 a month. A workplace pension contribution at the auto-enrolment minimum reduces both figures slightly.

When do I start paying the 40% higher rate?

Above GBP 50,270 of taxable income in England, Wales and Northern Ireland for 2026/27. The threshold is frozen until April 2028. In Scotland the equivalent point is the higher rate starting at GBP 43,663 (42%). Above the threshold, only the slice of income over GBP 50,270 attracts the 40% rate; the income up to that point continues to be taxed at the lower bands and rates.

How does the GBP 100,000 tax trap work?

Between GBP 100,000 and GBP 125,140 of adjusted net income, the Personal Allowance tapers at GBP 1 per GBP 2 of extra income. The lost allowance is taxed at 40% on top of the 40% paid on the income itself, producing an effective marginal rate of 60% in that band. NI at 2% pushes the marginal rate to 62% for employees. Pension contributions and Gift Aid are the standard routes to manage the taper by reducing adjusted net income.

Are Scottish income tax bands different in 2026/27?

Yes. Scotland operates six bands on non-savings non-dividend income under the Scotland Act 2016: 19% starter, 20% basic, 21% intermediate, 42% higher, 45% advanced, 48% top rate. Thresholds for 2025/26 ran starter to GBP 15,397, basic to GBP 27,491, intermediate to GBP 43,662, higher to GBP 75,000, advanced to GBP 125,140, top above. Savings and dividend income use UK rates regardless of Scottish residence. The Scottish Budget normally sets next-year thresholds in late winter.

Do bonuses get taxed at 50%?

No. Bonuses are taxed at the same band rates as salary, but the cumulative PAYE calculation in a single month may produce a high tax deduction in that month if the bonus pushes year-to-date pay into a higher band. The annualised position is correct; the deduction normalises over the rest of the tax year. Where a bonus straddles a tax-year boundary, deferring some of it into the next year may keep the recipient below a band threshold across two years.

Does the Welsh tax rate differ from England?

Not currently. The Welsh Rates of Income Tax under the Wales Act 2014 allow the Welsh Government to vary main rates by up to 10 percentage points, but the published rates for 2025/26 (and proposed for 2026/27) match England and Northern Ireland exactly. Welsh taxpayers have a C-prefix tax code from HMRC but the actual tax outcome is identical to taxpayers south or east of the border.