Answers · UK 2025/26
How is my UK tax bill calculated?
UK Income Tax = (taxable income − Personal Allowance £12,570) × marginal rate (20%/40%/45%). National Insurance = 8% on £12,570-£50,270 + 2% above. Each pay period under PAYE annualises and applies cumulatively. Year-end reconciliation via P800 or Self Assessment.
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UK tax calculation step-by-step 2025/26. Step 1 — start with gross taxable income (employment + self-employment profit + rental + savings interest above PSA + dividend above £500 + pension income). Step 2 — apply Personal Allowance £12,570 (tapered above £100k). Step 3 — apply Income Tax bands to remaining: 20% on £12,570-£50,270, 40% on £50,270-£125,140, 45% above. Step 4 — calculate NIC: employees 8% on £12,570-£50,270, 2% above. Step 5 — apply Student Loan if applicable (9% above threshold). Step 6 — apply pension salary sacrifice or contribution relief at marginal rate. Step 7 — claim reliefs (Marriage Allowance, Gift Aid higher-rate top-up, EIS/SEIS). Worked example: salary £50,000, basic-rate taxpayer. Personal Allowance: £0 tax on £12,570. Basic rate: 20% × £37,430 = £7,486 Income Tax. NIC: 8% × £37,430 = £2,994. Total tax £10,480. Take-home £39,520. PAYE applies cumulatively across the year. Year-end reconciliation: P60 (employed) or P800 / Self Assessment.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.