⚡ Quick Answer
UK income tax is charged in bands. The Personal Allowance (£12,570 in 2026/27) is tax-free. Above that: 20% basic rate on income to £50,270; 40% higher rate on income to £125,140; 45% additional rate above £125,140. Scotland has its own rates and bands. Each rate applies only to the income within that band — not your entire income. The Personal Allowance tapers at £1 for every £2 earned above £100,000, disappearing entirely at £125,140.
Income tax is the UK’s largest single revenue-raising tax, yet a significant proportion of working adults have a limited understanding of how the bands actually work. The most common misunderstanding — that earning above a band threshold means all income is taxed at the higher rate — is wrong and leads people to make poor decisions about earnings, bonuses, and tax planning.
The Tax-Free Personal Allowance
Every UK individual receives a Personal Allowance — the amount of income that is completely free of income tax. For 2026/27, the Personal Allowance is £12,570.
The Personal Allowance has been frozen at this level since April 2021 and is set to remain frozen until April 2030. While the number hasn’t changed, its real value has declined with inflation — pulling more people into paying income tax as wages rise. This “fiscal drag” is a significant source of additional government revenue without formally raising tax rates.
The allowance is reduced for high earners: by £1 for every £2 of income above £100,000, disappearing entirely when income reaches £125,140. This creates an effective 60% marginal tax rate on income between £100,000 and £125,140 — a notorious quirk of the UK tax system.
The Income Tax Bands for 2026/27
- 0% on income up to £12,570 (Personal Allowance)
- 20% basic rate on income from £12,571 to £50,270
- 40% higher rate on income from £50,271 to £125,140
- 45% additional rate on income above £125,140
Critically, each rate applies only to the income within that band. If you earn £55,000:
- You pay 0% on the first £12,570
- 20% on £12,571-£50,270 (£37,700 × 20% = £7,540)
- 40% on £50,271-£55,000 (£4,730 × 40% = £1,892)
- Total income tax: £9,432 — not 40% on the full £55,000 (which would be £22,000)
Scotland
Scotland has its own income tax rates and bands set by the Scottish Parliament, which apply to Scottish taxpayers’ non-savings, non-dividend income. Scotland currently has five bands (Starter, Basic, Intermediate, Higher, and Top) with rates of 19%, 20%, 21%, 42%, and 48% respectively — different from the rest of the UK.
How Tax Is Collected
For employees, income tax is deducted through PAYE — your employer calculates and deducts the correct amount from each pay packet. For self-employed people, income is reported through Self Assessment and tax paid by the 31 January deadline following the tax year.
For how recent Budget changes have affected take-home pay across different income levels, our guide on UK Budget 2026 tax changes covers the detail.
Frequently Asked Questions
Do I lose my Personal Allowance if I earn over £100,000?
It tapers — reduced by £1 for every £2 of income above £100,000. At £125,140, it’s fully withdrawn. This makes the effective marginal tax rate 60% on income between £100,000 and £125,140 (40% income tax + losing 40p of allowance for each £2 earned). Pension contributions are one of the most effective ways to reduce income into this range.
What is a tax code?
Your tax code tells your employer how much income to treat as tax-free. 1257L is the most common code, representing a Personal Allowance of £12,570. Different codes apply if you have benefits in kind, multiple jobs, or HMRC is collecting previously underpaid tax through your code.
Current rates and bands are confirmed at HMRC’s income tax rates page.
