Last updated: July 2026 · Sourced from official UK government publications
This is a plain-English definitions guide. All rates, bands, and allowances are drawn from HMRC and gov.uk official sources. This is not financial advice, see the disclaimer below.
Income tax is charged in bands. You pay nothing on the first £12,570 you earn, 20% on the slice above that, 40% once you pass £50,270 and 45% above £125,140. Here are the full 2026/27 bands for England, Wales and Northern Ireland, the separate Scottish bands, and what they actually do to your payslip.
For the 2026/27 tax year the income tax bands in England, Wales and Northern Ireland are 0% on income up to £12,570 (the Personal Allowance), 20% from £12,571 to £50,270, 40% from £50,271 to £125,140, and 45% on everything above £125,140. Nothing changed from 2025/26: every rate and every threshold is identical.
| Band | Taxable income | 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% |
Those are gross salary figures, so you can read them straight off an annual salary or a job advert. HMRC also publishes the same bands measured after the Personal Allowance has been taken off, which is where the £37,700 basic rate band comes from: £37,700 sitting on top of a £12,570 allowance is what puts the higher rate threshold at £50,270.
The 2026/27 tax year runs from 6 April 2026 to 5 April 2027. Scotland sets its own rates and bands and they are genuinely different, so if you live there the Scottish income tax bands further down are the ones that apply to your wages.
Income tax is charged in bands, not as a flat rate. Each rate applies only to the slice of income that falls inside that band, so crossing into the 40% band never means paying 40% on everything you earn. It means paying 40% on the pounds above £50,270 and nothing more.
The first £12,570 of income is tax-free. This is the Personal Allowance.
Example: on a salary of £40,000, you pay 0% on the first £12,570, then 20% on the remaining £27,430. Your income tax bill is roughly £5,486 per year (£457/month). Not 20% of the full £40,000.
This is also why a pay rise can never leave you worse off overall. Only the extra pounds get taxed at the new rate, so a raise that tips you over a threshold still increases your take-home pay.
Income tax is not the only deduction on your payslip. National Insurance is charged separately on top, at 8% of earnings between £12,570 and £50,270 and 2% above that, which is why take-home pay is lower than the income tax bands alone suggest. National Insurance has its own thresholds and rates, and they do not always move in step with income tax.
Scotland has six income tax bands rather than four. For 2026/27 they are 19% from £12,571 to £16,537, 20% from £16,538 to £29,526, 21% from £29,527 to £43,662, 42% from £43,663 to £75,000, 45% from £75,001 to £125,140, and 48% above £125,140. The £12,570 Personal Allowance is the same across the whole UK.
| Band | Taxable income | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Starter rate | £12,571 – £16,537 | 19% |
| Basic rate | £16,538 – £29,526 | 20% |
| Intermediate rate | £29,527 – £43,662 | 21% |
| Higher rate | £43,663 – £75,000 | 42% |
| Advanced rate | £75,001 – £125,140 | 45% |
| Top rate | Over £125,140 | 48% |
None of the Scottish rates changed for 2026/27, but three of the thresholds moved up. The starter band top went from £15,397 to £16,537 and the basic band top from £27,491 to £29,526, while the higher, advanced and top thresholds stayed exactly where they were.
Scottish rates and bands apply to earnings, self-employment profits, pensions and rental income. Savings interest and dividends are taxed at the UK-wide rates wherever in the UK you live, and so are capital gains, which are a separate tax entirely: see how Capital Gains Tax works if you have sold shares or a second property. Which set of bands you fall under is decided by where your main home is, not where your employer is based.
The Personal Allowance is £12,570, the amount of income you earn before paying any income tax. Above £100,000, the allowance is withdrawn at £1 for every £2 earned. By £125,140, it is gone entirely, creating an effective 60% marginal tax rate on income in that range. This is sometimes called the ‘£100k trap’.
The standard Personal Allowance is £12,570. But it starts to reduce once your income exceeds £100,000, you lose £1 of allowance for every £2 you earn above that level.
By the time you earn £125,140, the Personal Allowance is gone entirely. This creates an effective marginal tax rate of 60% on income between £100,000 and £125,140, one of the strangest quirks of the UK tax system.
HMRC defines ‘adjusted net income’ as the figure used to calculate Personal Allowance abatement above £100,000. It is total taxable income after certain deductions are taken off, and pension contributions and Gift Aid donations are the main two, which is why the taper bites at different points for two people on the same headline salary. The £100,000 threshold and the £1-for-£2 withdrawal work the same way in Scotland as in the rest of the UK.
HMRC publishes full guidance on how adjusted net income is calculated and on the £100,000 threshold at gov.uk/income-tax-rates. This is a general explanation of HMRC rules, not tax or financial advice, speak to a qualified adviser before making any decisions about your own tax position.
If you’re employed, your employer deducts income tax from your wages each payslip via PAYE (Pay As You Earn). Your employer gets your tax code from HMRC, which tells them how much to deduct.
The standard tax code is 1257L, the ‘L’ means you get the standard Personal Allowance, and 1257 represents £12,570 (drop the last digit). Other letters mean different things: ‘M’ and ‘N’ relate to Marriage Allowance, ‘K’ means your untaxed income exceeds your allowances, ‘BR’ means everything is taxed at basic rate (often a second job).
PAYE spreads the bands across the year rather than applying them in one lump. On code 1257L your employer gives you roughly £1,048 of tax-free pay a month, or £242 a week, and taxes the rest according to where it falls in the bands. That is also why a big one-off month, say a bonus or a lot of overtime, can look like it has been taxed at a punishing rate: PAYE briefly treats that month as if it were your normal earnings. It usually evens out over the following payslips.
Tax codes carry a country prefix too. Codes for Scottish taxpayers start with an S and Welsh taxpayers with a C, which is how your employer knows which set of bands to apply.
Check your payslip, if your tax code looks wrong, contact HMRC or check the HMRC app. The wrong tax code means you may be paying too much or too little tax. It is worth knowing that 1257L is also the standard emergency code, so seeing it on a first payslip in a new job is normal rather than a mistake.
Income tax applies to employment income (salary, bonuses, benefits in kind), self-employment profits, rental income from property, savings interest above the Personal Savings Allowance, dividends above the Dividend Allowance (£500 in 2025/26), and pension income once it is drawn. Income inside an ISA or pension is largely protected.
Income tax applies to more than just your salary:
Pension income counts once you start drawing it, and that includes the State Pension, which is taxable even though it is not paid through an employer’s payroll.
Income inside an ISA or pension is largely protected from income tax. Interest on cash held in an ISA, and income and gains from investments held in one, are not taxed and do not have to be declared on a tax return at all. A stocks and shares ISA gives investment income the same shelter.
HMRC reduces the income figure subject to tax through several mechanisms: pension contributions lower your taxable income at your marginal rate; the Marriage Allowance lets eligible spouses transfer up to £1,260 of Personal Allowance; Gift Aid donations extend the basic-rate band; and salary sacrifice arrangements (such as cycle-to-work schemes) reduce taxable pay.
HMRC’s rules mean several things reduce the income figure used to calculate income tax:
In England, Wales and Northern Ireland the 2026/27 income tax bands are: 0% on income up to £12,570 (the Personal Allowance), 20% from £12,571 to £50,270 (basic rate), 40% from £50,271 to £125,140 (higher rate), and 45% above £125,140 (additional rate). Every rate and threshold is the same as 2025/26. Scotland sets its own bands.
Yes. Scotland has six bands for 2026/27: 19% from £12,571 to £16,537, 20% from £16,538 to £29,526, 21% from £29,527 to £43,662, 42% from £43,663 to £75,000, 45% from £75,001 to £125,140, and 48% above £125,140. The £12,570 Personal Allowance is the same UK-wide. Scottish rates apply to earnings, self-employment profits, pensions and rental income, but not to savings interest or dividends.
The personal allowance is £12,570 for 2026/27, the same as 2025/26. This is the amount of income you can earn each year before paying income tax. It has been frozen at this level since 2021/22 and is set to remain frozen until at least 2027/28.
No. Tax bands are marginal, meaning you only pay the higher rate on the portion of income above each threshold. You pay 20% on income between £12,571 and £50,270, then 40% only on earnings above that. The 45% additional rate applies above £125,140.
A tax code tells your employer how much tax-free income to give you in each pay period. 1257L is the most common code, the number 1257 represents a £12,570 personal allowance, and the L means you qualify for the standard allowance. HMRC issues codes; you can check yours via your Personal Tax Account.
It depends on your tax band and how much interest you earn. Basic-rate taxpayers have a £1,000 Personal Savings Allowance; higher-rate taxpayers get £500; additional-rate taxpayers get none. Interest earned inside an ISA is always tax-free. Interest above your allowance is added to your income and taxed at your marginal rate.
Fiscal drag happens when tax thresholds are frozen while wages rise with inflation. More people are pulled into higher tax bands over time without any change in the headline rates. Because the personal allowance and higher-rate threshold have been frozen since 2021, many workers are paying more tax in real terms than they were before.
Budget changes to tax bands, the Personal Allowance, NI thresholds, Kvanta covers every announcement that affects your take-home pay, in plain English.
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