Everything you need to know about UK income tax for 2025/26: PAYE bands, National Insurance, the personal allowance taper, Scottish rates, and proven strategies to reduce your tax bill legally.
UK income tax is collected through Pay As You Earn (PAYE) for employed workers. Your employer deducts income tax and National Insurance from your salary before you receive it. Self-employed workers pay through Self Assessment.
Tax is progressive — you only pay each rate on income within that band, not your entire salary. Someone earning £60,000 doesn't pay 40% on the whole amount; they pay 0% on the first £12,570, then 20% on the next £37,700, then 40% only on the remaining £9,730.
| 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% |
These thresholds have been frozen since 2021/22 and are currently expected to remain frozen until at least 2027/28. With wage growth, this "fiscal drag" pulls more people into higher bands each year.
Not taxable: ISA returns, premium bond prizes, first £12,570 of earnings, qualifying workplace pension contributions (salary sacrifice).
National Insurance is a separate tax on earnings that funds the State Pension, NHS, and benefits. Employee rates for 2025/26:
| Earnings Band | Employee Rate |
|---|---|
| Below £12,570 (Primary Threshold) | 0% |
| £12,570 – £50,270 (Upper Earnings Limit) | 8% |
| Above £50,270 | 2% |
Employer NI: 15% on earnings above £5,000 (increased from 13.8% in April 2025). This is a cost to employers, not deducted from your pay.
You need 35 qualifying years of NI contributions to receive the full new State Pension (£230.25/week in 2025/26). You can check your NI record and State Pension forecast at gov.uk/check-state-pension.
The personal allowance (£12,570) starts reducing once your "adjusted net income" exceeds £100,000. For every £2 earned above £100,000, you lose £1 of personal allowance. This creates an effective 60% marginal tax rate between £100,000 and £125,140:
Total marginal rate: 62% (60% + 2% NI).
For someone earning £110,000, sacrificing £10,000 into a pension saves approximately £6,200 in tax and NI — making the effective pension cost just £3,800.
Try the Calculator →Scotland has its own income tax rates, set by the Scottish Parliament. For 2025/26:
| Band | Taxable Income | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Starter Rate | £12,571 – £14,876 | 19% |
| Basic Rate | £14,877 – £26,561 | 20% |
| Intermediate Rate | £26,562 – £43,662 | 21% |
| Higher Rate | £43,663 – £75,000 | 42% |
| Advanced Rate | £75,001 – £125,140 | 45% |
| Top Rate | Over £125,140 | 48% |
National Insurance remains UK-wide — Scottish taxpayers pay the same NI rates as rUK.
Pension contributions are one of the most powerful tax-saving tools in the UK. How relief works depends on the scheme type:
Your employer reduces your gross salary by the pension amount before calculating tax and NI. You save both income tax (20-45%) and employee NI (8-2%), and your employer saves 15% employer NI too (often passed on as extra pension contributions).
You contribute from taxed income, and the pension provider claims 20% from HMRC. Higher/additional rate taxpayers claim the extra relief via Self Assessment.
| Tax Band | £100 Pension Costs You | Effective Saving |
|---|---|---|
| Basic (20%) | £80 (net pay) / £72 (salary sacrifice) | 20-28% |
| Higher (40%) | £60 / £58 | 40-42% |
| Additional (45%) | £55 / £53 | 45-47% |
| 60% trap zone | £38 (salary sacrifice) | 62% |
Annual Allowance: £60,000 or 100% of earnings (whichever is lower). Unused allowance carries forward for 3 years.
Calculate Pension Growth →Let's calculate the total deductions for a £55,000 salary in England with 5% salary sacrifice pension and no student loan:
| Item | Calculation | Amount |
|---|---|---|
| Gross Salary | £55,000 | |
| Pension (5% salary sacrifice) | 55,000 × 5% | −£2,750 |
| Taxable Income | £52,250 | |
| Income Tax | 0% on £12,570 + 20% on £37,700 + 40% on £1,980 | −£8,332 |
| National Insurance | 8% on £37,700 + 2% on £1,980 | −£3,056 |
| Take-Home Pay | £40,862 | |
| Monthly Take-Home | £40,862 ÷ 12 | £3,405 |
Effective tax rate (including NI): 20.7%. Without pension sacrifice, take-home would be £39,752 — pension sacrifice saves £1,110 in tax and NI despite only "costing" £2,750 from gross pay.
Calculate Your Exact Tax →| Date | Event |
|---|---|
| 6 April | New tax year begins |
| 5 April | Tax year ends — deadline for ISA, pension, and CGT allowances |
| 31 July | Second payment on account for Self Assessment |
| 5 October | Register for Self Assessment if newly self-employed |
| 31 October | Paper Self Assessment deadline |
| 31 January | Online Self Assessment and tax payment deadline |