Answers · UK 2025/26

How does the UK income tax system work?

The UK uses a progressive income tax system with a tax-free Personal Allowance of £12,570. Above that, you pay 20% (basic rate) up to £50,270, 40% (higher rate) up to £125,140, and 45% (additional rate) on anything above £125,140 in 2026/27.

Last updated: 27 June 2026Last reviewed: 27 June 2026How we verify

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The UK income tax system taxes earnings progressively -- the more you earn, the higher the rate applied to the upper portion of your income. Only the slice of income that falls within each band is taxed at that band's rate; lower bands are unaffected. **2026/27 Income Tax Bands (England, Wales, Northern Ireland)** - Personal Allowance: £0 -- £12,570 taxed at 0% - Basic rate: £12,571 -- £50,270 taxed at 20% - Higher rate: £50,271 -- £125,140 taxed at 40% - Additional rate: above £125,140 taxed at 45% **Worked Example -- £60,000 salary** 1. Personal Allowance: £12,570 @ 0% = £0 2. Basic rate band: £37,700 (£12,571 to £50,270) @ 20% = £7,540 3. Higher rate: £9,730 (£50,271 to £60,000) @ 40% = £3,892 4. **Total income tax: £11,432** **Personal Allowance taper** If your income exceeds £100,000, the Personal Allowance reduces by £1 for every £2 earned above that threshold, reaching £0 at £125,140. This creates an effective 60% marginal rate between £100,000 and £125,140. **Scottish rates** Scotland has its own income tax rates and bands for non-savings, non-dividend income. Scottish taxpayers pay a Starter rate of 19%, Basic 20%, Intermediate 21%, Higher 42%, and Top rate 48%, so the figures above apply to the rest of the UK only. **What counts as income?** Taxable income includes employment earnings, self-employment profits, rental income, most pension income, and savings interest above your Personal Savings Allowance. Dividends are taxed separately under dividend tax rates. **How is it collected?** For employees, income tax is deducted via PAYE by your employer. Self-employed individuals pay through Self Assessment, filing a return by 31 January following the tax year end. You can use a take-home pay calculator to model your net pay after income tax and National Insurance.