How UK Income Tax is worked out
Income Tax is charged on the part of your income that sits above your tax-free personal allowance. For 2026/27 the standard personal allowance is £12,570 — you pay no Income Tax on the first £12,570 you earn. Everything above that is taxed in bands: 20% at the basic rate, 40% at the higher rate and 45% at the additional rate in England, Wales and Northern Ireland.
The bands are "marginal", which means only the slice of income that falls inside each band is taxed at that band's rate — moving into the higher-rate band does not tax your whole income at 40%, only the part above the threshold. National Insurance is charged separately on top of Income Tax and is not included in this tool; to see both together use the Take-Home Pay Calculator.
Worked example: £45,000 salary
Take someone earning £45,000 in England, Wales or Northern Ireland:
• The first £12,570 is covered by the personal allowance and taxed at 0%.
• That leaves £32,430 of taxable income, all within the basic-rate band.
• Income Tax = 20% × £32,430 = £6,486 for the year.
That is an effective Income Tax rate of about 14.4% of the full salary — lower than the 20% band rate, because the first £12,570 is tax-free. National Insurance would be charged on top.
2026/27 Income Tax bands (England, Wales & N. Ireland)
| 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 are frozen for 2026/27. Because they don't rise with inflation, pay rises can pull more of your income into higher bands over time — an effect known as "fiscal drag".
Income Tax in Scotland
Scotland sets its own Income Tax bands and rates, which apply to most non-savings income. There are six bands, running from a 19% starter rate up to a 48% top rate, with intermediate steps in between — so the tax on the same salary can differ from the rest of the UK. The personal allowance (£12,570) is the same UK-wide, and National Insurance is identical across the UK. Select Scotland in the calculator above to see the exact Scottish figures for your income.
What counts as taxable income
Income Tax isn't only about your salary. It can also apply to pension income, profits from self-employment, rental income, and taxable state benefits. Some income has its own separate tax-free allowances — for example the Personal Savings Allowance for interest and the Dividend Allowance for share dividends — and money held in an ISA is free of Income Tax altogether. Most employees never file anything: Income Tax is collected automatically through PAYE using your tax code. If you're self-employed, you report and pay through Self Assessment instead.
The personal allowance and the "60% tax trap"
If you earn more than £100,000, your personal allowance is gradually withdrawn — reduced by £1 for every £2 you earn above £100,000, and gone entirely once you reach £125,140. Because you lose tax-free allowance and pay tax on the extra income at the same time, every £1 earned between £100,000 and £125,140 is effectively taxed at around 60%. This is why many people in that range pay extra into a pension to bring their taxable income back below £100,000.
Income Tax vs National Insurance
These are two separate deductions. Income Tax uses the £12,570 personal allowance and rises through 20%, 40% and 45% bands. National Insurance has its own threshold and, for employees, is charged at 8% and then 2%. This calculator shows Income Tax only — use the National Insurance Calculator for NI, or the Take-Home Pay Calculator to combine the two into a single figure.
Frequently asked questions
How much Income Tax will I pay on £45,000?
On a £45,000 salary in England, Wales or NI for 2026/27, Income Tax is £6,486 — 20% of the £32,430 that sits above the £12,570 personal allowance. National Insurance is charged on top of this.
What is the personal allowance for 2026/27?
£12,570. It is reduced by £1 for every £2 you earn over £100,000 and is gone entirely at £125,140.
What are the Income Tax bands for 2026/27?
In England, Wales and NI: 20% basic rate up to £50,270, 40% higher rate up to £125,140, and 45% additional rate above that. Scotland has six bands from 19% to 48%.
Does moving into the higher-rate band tax all my income at 40%?
No. The bands are marginal, so only the part of your income above £50,270 is taxed at 40%. Everything below is still taxed at 0% and 20% as normal.
Is Income Tax different in Scotland?
Yes. Scotland has its own bands and rates (19% to 48%), so the tax on the same salary differs. National Insurance is the same UK-wide.
What is the 60% tax trap?
Between £100,000 and £125,140 your personal allowance is withdrawn as income rises, so each extra £1 is effectively taxed at around 60%. Pension contributions are a common way to reduce it.
Is money in an ISA taxed?
No. Interest, dividends and gains inside an ISA are free of Income Tax and Capital Gains Tax, which is why ISAs are popular for savings and investments.
Does this include National Insurance?
No. This tool shows Income Tax only. Use the Take-Home Pay calculator to see Income Tax and National Insurance together.