How is income tax calculated in United Kingdom?
UK income tax runs from 6 April to 5 April. Everyone gets a tax-free Personal Allowance of £12,570, which shrinks by £1 for every £2 of income above £100,000 and is gone at £125,140. Above the allowance, England, Wales and Northern Ireland charge 20% on the next £37,700, 40% up to £125,140 and 45% above.
Scotland sets its own bands on wages: 19%, 20%, 21%, 42%, 45% and 48%. Employees also pay Class 1 National Insurance through payroll.
What is the income tax rate in United Kingdom?
| Taxable income | Rate |
|---|---|
| £0 – £37,700 | 20% |
| £37,700 – £125,140 | 40% |
| Over £125,140 | 45% |
| Taxable income | Rate |
|---|---|
| £0 – £3,967 | 19% |
| £3,967 – £16,956 | 20% |
| £16,956 – £31,092 | 21% |
| £31,092 – £62,430 | 42% |
| £62,430 – £125,140 | 45% |
| Over £125,140 | 48% |
What mandatory salary deductions apply?
- National Insurance: 8% on earnings between £12,570 and £50,270 a year (£242 and £967 a week), and 2% above.
- Student loan repayments and workplace pension contributions also come out of many payslips, but depend on your plan and are not included.
Gross salary and take-home salary
Gross salary is what your contract says before anything is taken off. Take-home salary is what reaches your bank account after income tax and the compulsory employee contributions. Employer contributions are paid on top of your salary and are not taken from it.
Example: £2,916.67 a month
An employee in England on £35,000 a year, HMRC’s own example salary.
| Item | Monthly | Annual |
|---|---|---|
| Gross salary | £2,916.67 | £35,000.00 |
| Income tax | £373.83 | £4,486.00 |
| Compulsory contributions | £149.53 | £1,794.40 |
| Take-home pay | £2,393.30 | £28,719.60 |
Effective income tax rate 12.8%; all deductions 17.9%.
How can employees legally reduce their taxes?
- Pension contributions get tax relief at your top rate, and salary sacrifice also saves National Insurance.
- Between £100,000 and £125,140 every £1 of pension contribution also restores part of the Personal Allowance.
- Marriage Allowance lets a spouse who does not use all their allowance pass £1,260 of it to the other.
Frequently asked questions
What is the tax-free allowance for 2026–27?
£12,570. It reduces by £1 for every £2 of income over £100,000, so it is zero at £125,140 or more.
Why is the rate between £100,000 and £125,140 so high?
Losing £1 of allowance for every £2 earned means that slice is taxed at 40% plus the tax on the lost allowance, an effective 60% before National Insurance.
Is Scottish income tax higher?
Scottish taxpayers pay less than the rest of the UK on lower incomes, thanks to the 19% starter rate, and more on higher incomes, with rates of 42%, 45% and 48%.
What National Insurance does an employee pay?
8% of earnings between £12,570 and £50,270 a year and 2% above that.
Official sources
- HM Revenue & Customs: Income Tax rates and Personal Allowances. Read 5 November 2026.
- HM Revenue & Customs: Scottish Income Tax 2026 to 2027. Read 5 November 2026.
- HM Revenue & Customs: Rates and allowances: National Insurance contributions. Read 5 November 2026.
- HM Revenue & Customs: Self-employed National Insurance rates 2026 to 2027. Read 5 November 2026.
Last reviewed 5 November 2026. An estimate for planning, not tax advice; your employer’s payroll and the tax authority decide what is actually withheld.
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