2025/26 Income Tax Bands and Rates
UK income tax is charged on different bands of income at different rates. You don't pay a single flat rate on your entire salary - each band of income is taxed at the rate for that band only.
| Band | Income (England, Wales, N. Ireland) | Tax Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
These figures apply in England, Wales, and Northern Ireland. Scotland has its own income tax bands set by the Scottish Parliament with different rates and thresholds - Scottish taxpayers pay Scottish income tax on non-savings, non-dividend income.
The bands have been frozen since 2021 and are set to remain frozen until at least April 2028. With wages rising due to inflation, more people are being pulled into higher bands each year without any actual change in the rates - a process sometimes called "fiscal drag."
Income tax is marginal - each band applies only to the income within that band, not to your total income. If you earn £55,000, you don't pay 40% on the whole £55,000. You pay 0% on the first £12,570, 20% on the next £37,700, and 40% only on the £4,730 above £50,270. Your total income tax bill is £9,432 - an average effective rate of just 17.1%.
Worked Examples: What You Actually Pay
| Salary | Income Tax | Effective Rate | Take-Home (approx) |
|---|---|---|---|
| £20,000 | £1,486 | 7.4% | ~£17,344 |
| £30,000 | £3,486 | 11.6% | ~£24,344 |
| £40,000 | £5,486 | 13.7% | ~£31,344 |
| £50,000 | £7,486 | 15.0% | ~£38,344 |
| £60,000 | £11,432 | 19.1% | ~£43,868 |
| £80,000 | £19,432 | 24.3% | ~£53,868 |
| £100,000 | £27,432 | 27.4% | ~£63,868 |
These figures show income tax only. National Insurance contributions (NICs) are separate and add another 8-12% on top for most employees. Take-home figures shown are approximate and do not include NICs, pension contributions, or student loan deductions.
The Personal Allowance and Who Loses It
The Personal Allowance is £12,570 for 2025/26 - the amount of income you can earn completely tax-free. For most people, this is fixed. But if your income exceeds £100,000, the Personal Allowance is gradually withdrawn at a rate of £1 for every £2 of income above £100,000.
At £125,140, the Personal Allowance is completely gone. This taper creates a trap that many higher earners don't realise they've fallen into.
In the £100,000 to £125,140 income range, you face an effective marginal tax rate of 60%. Here's why: for every £2 of extra income in this range, you lose £1 of Personal Allowance. That £1 of lost allowance was worth 40% tax (higher rate band). So you pay 40% tax on the extra income, plus an extra 40% on the £1 of income that was previously tax-free = effectively 60% on each extra pound. The solution is to reduce your adjusted net income below £100,000 through pension contributions, salary sacrifice, or Gift Aid donations.
Income Tax vs National Insurance
Income tax and National Insurance are two separate deductions from your pay - but they both reduce take-home. Many people look only at income tax rates and underestimate their total deductions.
For employees in 2025/26, National Insurance contributions are:
- 0% on earnings up to £12,570 per year
- 8% on earnings between £12,570 and £50,270
- 2% on earnings above £50,270
Combined with income tax, a basic rate taxpayer earning between £12,570 and £50,270 faces a marginal rate of 28% (20% income tax + 8% NICs). A higher rate taxpayer above £50,270 faces a combined marginal rate of 42% (40% income tax + 2% NICs). This is what actually leaves your payslip.
Legal Ways to Reduce Your Income Tax Bill
Pension contributions: Contributions to a workplace or personal pension reduce your adjusted net income. For higher rate taxpayers, pension contributions get 40% tax relief - put in £600 net and £1,000 goes into your pension. For anyone above £100,000, pension contributions are the most effective tool for bringing income back below the Personal Allowance taper zone.
Salary sacrifice: Arranging with your employer to take part of your salary as pension contributions rather than cash. This reduces your gross salary for both income tax and National Insurance purposes - saving NICs as well as income tax.
ISA investments: Income from ISA savings and investments doesn't appear on your tax return or contribute to your adjusted net income. For people near the £100,000 threshold, moving savings into ISAs can help keep adjusted net income below the taper zone.
Gift Aid: Charitable donations made through Gift Aid extend your basic rate band by the grossed-up donation amount. For higher rate taxpayers, this means more income is taxed at 20% rather than 40%.
Marriage Allowance: If one partner earns below the Personal Allowance and the other is a basic rate taxpayer, the lower earner can transfer up to £1,260 of unused Personal Allowance to their partner - saving up to £252 in tax per year.
Your PAYE tax code tells your employer how much tax-free income you're entitled to. The standard code for 2025/26 is 1257L. If your code is wrong (too low), you're overpaying tax through PAYE. Common reasons for wrong codes include unprocessed expense claims, missing pension contribution records, or HMRC estimates based on old data. Check your code on your payslip and query it with HMRC if it looks wrong. Overpaid tax is refundable but you have to claim it.