Hey, do you know your tax brackets? I’m talking about the bands that determine whether you’re a basic (20%), higher (40%), or additional-rate (45%) taxpayer.
Everyone knows their height and their shoe size. An occasional show-off can even tell you their inside leg measurement.
But many of us have no idea where the various tax brackets start and end – nor where our income falls within these bands.
True, the ongoing – and increasingly controversial – freezing of personal tax allowances and income tax thresholds has made people more aware.
Yet too many people still don’t know how much of their salary they get to keep, or even how to work it out.
Let’s address this with some concrete numbers. We’ll then see what your tax bracket means for your take home pay.
2026/2027 UK tax brackets
The rate of tax you pay depends on your total income from all sources. This includes salary, interest, dividends, pensions, property letting, and so on.
You add up all this income to get your total income figure.
You then subtract your personal allowance from the total to see which tax bracket you fit into. More on that in a moment.
For England, Wales, and Northern Ireland, the income bands after allowances are currently:
Income Tax Rate
2025/2026
2026/2027
Starting rate for savings: 0%
£0-£5,000
£0- £5,000
Basic rate: 20%
£0- £37,700
£0- £37,700
Higher rate: 40%
£37,701-£125,140
£37,701-£125,140
Additional 45% rate
£125,141 and above
£125,141 and above
Source: HMRC
Note: If your non-savings taxable income is above the starting rate limit, then the starting savings rate does not apply to your savings income.
Scotland has its own (similar) tax rates. Refer to the Scottish Government for the gory details.
If you prefer to think in terms of tax bands – that is, before deducting the personal allowance – then for England, Wales, and Northern Ireland these are:
- Personal allowance at 0%: £12,570
- Basic rate 20% – £12,571 to £50,270
- Higher rate 40% – £50,271 to £125,140
- Additional rate 45% – £125,141 to the moon
The freeze on the personal allowance and higher-rate thresholds has been extended until April 2031. This means fiscal drag will continue to pull more people into higher tax bands as wages rise.
Complicating factor alert! If you earn over £100,000 you’ll pay a marginal rate of 60% on some of your income. What joy! More below.
2026/2027 personal allowance
The tax year runs from 6 April to 5 April the next year.
All of us have a basic level of income – whether we’re employed or self-employed – that we can earn during the tax year before we pay income tax.
But once your allowance is used up, the government starts to take its cut via income tax.
Everyone starts with the same personal allowance:
- For 2026/27, this personal allowance is £12,570
Your personal allowance may be bigger if you qualify for Married Couple’s Allowance or Blind Person’s Allowance. It’s reduced if your income is over £100,000. We’ll get to that in a minute.
Note the £12,570 personal allowance is the same as it was in 2021/22, and it’s currently frozen until April 2031. This fiscal drag strategy has generated extra government revenue by pulling ever more income into taxation over time.
As your salary rises, proportionally less is covered by the tax-free personal allowance. You’ll therefore lose a greater share of your income to tax.
Pensioned off
Another consequence of freezing the personal allowance is that very soon it will be insufficient to fully cover the state pension.
Following a 4.8% hike in April, the state pension for this tax year is £241.30 a week, or £12,547.60 a year – just under the £12,570 personal allowance.
But if the pension continues to rise while the personal allowance stays frozen, then over the next few years millions will pay tax on their state pension. That seems a clumsy way to shuffle money between the state and its pensioners.
Even today, it only requires a small amount of additional taxable income from other taxable sources to take a pensioner over the personal allowance.
Blind Person’s and Married Couple’s allowance
There are two other personal allowances you might qualify for:
These are added to the standard personal allowance, if you qualify. They can give you or your spouse a slightly higher personal allowance.
- MoneySavingExpert has a good guide to the Married Couple’s Allowance.
The 60% tax trap for those earning £100,000 or more
If you’re on a six-figure salary then I’ve got some unpleasant numbers for you.
Anyone with an income of over £100,000 sees their personal allowance reduced by £1 for every £2 of income above the £100,000 threshold.
This effectively pushes up the marginal rate of tax you pay on income between £100,000 and £125,140 to 60%.
On earnings above £125,140, the 45% additional tax rate applies.
Ironically, you’re taxed at a lower rate on your income above £125,140 than on what you earn between £100,000 and £125,140. That’s because your personal allowance has been totally whittled away by this point.
The effective 60% marginal rate you’ll pay on the £25,140 chunk of income between £100,000 and £125,140 is far higher than official tax rates indicate.
Apparently it is the second highest marginal tax rate in Europe, beaten only by a small village called Munkdeal in Sweden with a 70% marginal rate.
Note: there are extra complications to consider if your family is eligible for Child Benefit or support for free childcare. See below.
Take cover!
If your income falls within the £100,000 tax trap band, there’s a strong case for increasing your pension contributions by enough to reduce your taxable income to below £100,000.
Rather than paying 60% tax on your income above £100,000 to HMRC, you’ll instead get generous tax relief on your extra pension savings.
Remember: you can put up to £60,000 into a pension every tax year.
The child benefit booby-trap
Got kids? There’s a similar effective hike in the marginal tax rate when either parent earns over £60,000 a year.
Child benefit is available to parents of children under 20. But this benefit is progressively withdrawn above the £60,000 threshold, via a fiddly High Income Child Benefit Charge that sees you repay 1% of your child benefit for every £200 you earn above the threshold.
The High Income Child Benefit Charge starts at £60,000 and fully removes child benefit at £80,000.
For example, if you earn £70,000 – that is, £10,000 above the income threshold – then you would need to repay 50% of the full child benefit amount. (Because £10,000/£200 = 50).
At £80,000 you’ll pay it all back. (£20,000/£200 = 100).
Depending on how many kids you have – and hence how much child benefit you’ll be repaying – this could equate to an effective tax rate of as much as 56% on earnings between £60,000 to £80,000 with three qualifying children.
Again, you might consider increasing your pension contributions to keep your child benefit whilst improving your financial future.
How tax brackets determine the tax you pay
Let’s run through a couple of examples to see how this all works.
Basic-rate tax payer
Let’s say you will earn £45,000 in 2026/27 from all sources. Your taxable income is £45,000 minus your personal allowance of £12,570.
So £32,430.
This means all your income is in the 20% tax bracket, as it’s less than £37,701 in the first table above.
In practice you’ll pay no tax on the first £12,570 you earn, and 20% on the remaining £32,430.
You’ll therefore pay £6,486 in tax on your income.
Higher-rate payer
Now let’s imagine your total income adds up to £60,000.
By the same method (£60,000 minus £12,570) your taxable income is £47,430.
The first £37,700 of this will be taxed at 20%.
The rest – £9,730 – is taxed at 40%.
You’ll pay:
- Basic rate tax of £7,540
- Higher rate tax of £3,892
- Total tax paid is £11,432
In nearly all cases you’ll also pay additional and hefty National Insurance contributions.
National Insurance
National Insurance works separately from income tax. But in practice it’s just an extra tax you pay on your earnings.
The rates come with their own fiddly rules – and in recent years the Government has been prone to messing with them.
National Insurance rates
Currently, most employees pay employee National Insurance at 8% on earnings between a ‘primary threshold’ and an ‘upper earnings limit’, and 2% above that.
In terms of your salary, these so-called Class 1 contributions are charged at:
Your salary
6 April 2026 to 5 January 2027
£242 to £967 a week (£1,048 to £4,189 a month)
8%
Over £967 a week (£4,189 a month)
2%
Source: HMRC
Your employer also pays National Insurance contributions, based on your salary. This leads to the technique known as salary sacrifice.
With salary sacrifice you give up some pay in return for another benefit – usually extra pension contributions. You get the benefit, and you and your employer also pay less National Insurance.
However the government is planning to restrict salary sacrifice from 2029. Act now if you want to make the most of the existing opportunity.
Self-employed people make different National Insurance contributions, depending on profits. These are worked out via a self-assessment tax return.
National pastime
Most people find it even harder to keep track of what they’re paying in National Insurance than income tax. National Insurance rates are therefore less politically contentious than income tax rates when raising extra revenue.
Hence the National Insurance rates and thresholds have been repeatedly moved around over the last few years.
For example, you may remember there was a hike in employer National Insurance contributions (NICs) in the October 2024 Budget. The net result was a higher ‘tax on jobs’, as the tabloids and opposition MPs put it.
You don’t directly pay employer’s NICs. The company does. But the odds that employers absorbed all the cost of these hikes without a hit to wages or job creation seems remote to me.
Anything else we could write about National Insurance will not be exhaustive enough to stop someone saying “what about X?” in the comments.
Don’t blame us! Blame the labyrinthine UK tax system.
In a sensible world we’d merge National Insurance with income tax. This doesn’t happen because (a) supposedly the money raised is set aside for state pensions and other welfare funding (it’s not) and (b) no UK government wants to be seen setting an income tax rate that’s explicitly above 50%.
Your tax bracket determines your take home pay
Like many students, I was philosophically a left-wing tax-and-spender.
It was a pretty low-stress position to hold when I paid no taxes…
…but then I got a job.
Suddenly I saw how much money was taken out of the meagre pay I received for ramming my head into the coalface for 40 hours a week. Economically speaking, I turned more to the right.
As my dad used to say, quoting someone else:
If you’re not a socialist at 20 you haven’t got a heart.
If you’re not a capitalist at 30 you haven’t got a head.
I’d add: if you don’t know your tax bracket then you haven’t got a clue.
Most of us care about what we get to keep, after tax. We’re not so preoccupied with how our taxes help to fund the NHS or to pay interest on the UK’s national debt – vital though all that may be.
So when we start working – and start paying taxes – we’re shocked by how our pay shrinks on the way to our bank accounts.
Beyond the sticker shock
Knowing your tax bracket is about more than just stopping you from fainting when you see your take home pay, though.
Armed with your knowledge of tax brackets, you can be more strategic about adding money to ISAs and pensions.
As we’ve seen above, the tax system gets progressively more punishing as your salary passes through various thresholds. You might therefore prefer to put more of your higher-taxed earnings into a pension, for example.
Thanks to pension tax relief, you’ll sacrifice less of a share of your post-tax disposable income, while you’re also building up a bigger retirement pot.
A fiscal drag
The tax take from British workers has been rising for over a decade.
This was partly achieved by ‘fiscal drag’.
Fiscal drag sees rising salaries pulling more workers into the higher-rate tax bands, because the tax band thresholds and allowances are frozen or only raised by a bit – despite high inflation.
After the financial crisis of 2008/2009, the threshold for higher-rate tax was actually explicitly lowered, despite inflation running above target. That move dragged millions more people into the higher-rate tax bracket.
National Insurance rates also rose for higher-rate tax payers. And the wheeze that cut the personal allowance on incomes above £100,000 was introduced.
True, the additional rate of income tax was reduced from a short-lived 50% to 45% in 2013. And eventually both the personal allowance and the higher-rate tax thresholds were lifted.
But as we’ve seen above, they were later frozen – a freeze lately extended to April 2031.
In short, if you remember the arcade game Frogger, that’s a good analogy for the ever-changing UK’s income tax landscape.
Bring me higher (tax) love
Some may quibble with my simplified narrative. But it’s directionally correct.
See this graph from the IFS, and pay particular attention to the yellow line:
Source: IFS
You can see that the numbers paying higher rates of tax (yellow line) has hugely increased since 2009 – let alone 1990.
Perhaps that’s fine. You might even argue the rise in higher-rate taxpayers is a reflection of rising income inequality as much as frozen tax bands.
We can debate that another day. I’m just pointing out how things have been going – and what might happen next.
We just lived through a period of historically high inflation. After peaking in double-digits in 2022, inflation was still an above-target 3.5% as recently as March 2026.
Yet the personal allowance and the higher-rate tax thresholds remain frozen.
Unless the government changes course, as many as one in four workers will be paying higher-rate and additional-rate taxes by 2031.
A higher calling
If you’re a higher earner wondering why you’re not feeling as wealthy as you thought you would, higher taxes will have something to do with it.
Okay, and higher mortgage rates and energy and food bills since 2022.
(Not to mention hedonic adaption! But let’s stay on-topic.)
The reality is being a higher-rate taxpayer no longer means you’re wealthy.
Yes, I’m aware that the gross median annual earnings in the UK for full-time employees is still under £40,000 – and so well below the higher-rate bracket. Nobody needs to get on a soap box to shout at me.
But the point stands. Paying higher-rate tax no longer makes you Bertie Wooster.
Resistance is tax-efficient
I’m all for taxing, spending, and the UK offering a decent welfare safety net.
But I’m not going to leave a tip.
I’m a law-abiding citizen. However there are sensible and legal steps you can take to mitigate your total tax bill.
- Use your ISA allowance and/or a pension to shelter your savings as much as possible.
- Take steps to manage capital gains tax.
- You could also consider VCTs and EIS schemes if you’re up for the research, extra costs, and greater risks.
Higher-rate taxpayers should consider making maximal contributions into their pension. Most people are allowed to pay up to £60,000 into a pension in a year without any tax penalties , so there’s lots of headroom.
If you can cut your spending to allow for very big pension contributions, then you might be able to get the higher-rate tax you’d otherwise pay entirely wiped out by tax relief. Depending on how much you earn, of course.
Bigger pension contributions accelerate the growth of your retirement pot. Just remember you’ll almost certainly have to pay some tax when you drawdown your pension income later.
The bottom line? Taxes are continuing to rise. Take cover, or take the pain.
Note: This article was updated in June 2026 with the latest figures for UK tax brackets, personal allowances, NICs, median pay, and more. Comments below may refer to old numbers. Please check the dates if unsure.
