Published 1 January 2025 · 8 min read

UK Income Tax Rates 2025/26 — Bands, Thresholds & Allowances

It's April, your tax code's just changed, or maybe you've started a new job, and your first payslip doesn't look quite right. Your take-home pay isn't what you expected, and you're staring at a bunch of deductions trying to work out whether HMRC's taken too much or you've just been overly optimistic about your salary. We get it — UK income tax isn't exactly straightforward, but once you understand how the bands actually work, it makes a lot more sense.

Your personal allowance

The personal allowance for 2025/26 is £12,570 — that's the amount you can earn before you pay a single penny in income tax. It's been frozen at this level since 2021/22, which means inflation has been quietly dragging more people into higher tax brackets. Thanks for that, fiscal drag.

If you earn over £100,000, things get worse. Your personal allowance starts to shrink — you lose £1 of allowance for every £2 you earn above the £100k mark. By the time you hit £125,140, it's gone completely. We'll explain why this creates an effective 60% tax rate further down, because it's one of the most misunderstood bits of UK tax.

Income tax bands (England, Wales & Northern 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%

Scottish income tax bands 2025/26

If you live in Scotland, you've got a completely different set of bands. Scotland sets its own income tax rates and has more brackets than the rest of the UK — seven in total, compared to four. Generally, you'll pay slightly less on lower incomes and a bit more on higher ones compared to someone in England on the same salary.

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 contributions (NICs)

On top of income tax, you'll also pay National Insurance — because apparently one payroll deduction wasn't enough. For employees in 2025/26, you pay 8% on earnings between £12,570 and £50,270, and 2% on anything above that. Your employer pays 15% on your earnings above the £5,000 secondary threshold (which is why employing people costs significantly more than just their salary).

If you're self-employed, you pay Class 4 NICs at 6% on profits between £12,570 and £50,270, and 2% above that. Slightly lower than employees, but you're also not getting employer contributions to your pension or sick pay, so it balances out.

Key thresholds at a glance

• Personal Allowance: £12,570
• Basic rate band: £12,571 – £50,270 at 20%
• Higher rate band: £50,271 – £125,140 at 40%
• Additional rate: over £125,140 at 45%
• Personal Allowance taper: starts at £100,000
• NI primary threshold: £12,570

The biggest misconception: "my whole salary is taxed at 40%"

This is the most common mistake people make with UK tax, and it causes genuine panic. If you earn £60,000, you are not paying 40% on your entire salary. You're paying nothing on the first £12,570, then 20% on the next £37,700 (from £12,571 to £50,270), and only 40% on the last £9,730 (from £50,271 to £60,000).

Your total income tax bill would be £7,540 + £3,892 = £11,432. That's an effective tax rate of about 19% — nowhere near 40%. The UK uses a progressive system, meaning each band only applies to the income within that band, not to everything below it. Once you understand this, payslips make a lot more sense.

The additional rate of 45% kicks in above £125,140. This threshold was lowered from £150,000 in 2023/24. If you're in this bracket, you've also lost your entire personal allowance, so you're paying tax on every pound from the first one.

The £100k trap — why you effectively pay 60% tax

This is, in our opinion, one of the most unfair quirks in the entire UK tax system. If you earn between £100,000 and £125,140, your effective marginal tax rate isn't 40% — it's 60%. Here's why.

For every £2 you earn above £100,000, you lose £1 of your personal allowance. So earning an extra £2 means you pay 40% tax on that £2 (that's 80p), plus you lose £1 of tax-free income which now gets taxed at 40% (another 40p). That's £1.20 in tax on £2 of extra earnings — a 60% marginal rate.

It feels unfair because someone earning £99,000 has a lower marginal rate than someone earning £110,000, even though the £110k earner is supposedly in the "same" 40% band. The taper effectively creates a hidden 60% band that HMRC doesn't advertise.

If you're in this income range, pension contributions are your best friend. A £10,000 pension contribution for someone on £110,000 drops their adjusted income to £100,000, restoring the full £12,570 allowance. That single pension contribution could save you roughly £6,000 in tax — a 60% return before the pension even grows. It's one of the best tax planning moves available to UK taxpayers.

Student loan repayments

If you've got a student loan, you'll see another deduction on your payslip. The repayment thresholds for 2025/26 are:

• Plan 1 (pre-2012 England/Wales, or Scottish/NI loans): 9% on earnings above £24,990
• Plan 2 (post-2012 England/Wales): 9% on earnings above £27,295
• Plan 4 (Scottish post-2012): 9% on earnings above £27,660
• Plan 5 (from 2023/24): 9% on earnings above £25,000
• Postgraduate loan: 6% on earnings above £21,000

These come off your pay automatically through PAYE, so there's nothing you need to do. But it's worth knowing they're there when you're working out your actual take-home pay — especially if you've got both an undergraduate and postgraduate loan running at the same time.

Pension tax relief

Pension contributions get tax relief at your marginal rate, which makes them genuinely worth understanding. If you're a basic rate taxpayer, every £80 you put into your pension gets topped up to £100 by HMRC claiming back the 20% tax. Higher rate taxpayers can claim back another 20% through self-assessment, so a £100 pension contribution effectively costs just £60. The annual allowance is £60,000 or 100% of your earnings (whichever's lower), and you can carry forward unused allowance from the previous three years.

Marriage Allowance

If you're married or in a civil partnership and one of you earns under £12,570, you can transfer £1,260 of unused personal allowance to the other partner — as long as the receiving partner is a basic rate taxpayer. It saves a maximum of £252 a year, and you can backdate the claim up to four years, so eligible couples who haven't applied yet could get up to £1,008 back. It's not life-changing money, but it's free money, and surprisingly few people claim it.

Dividend and savings allowances

The dividend allowance has been slashed in recent years — it's now just £500 per year for 2025/26 (it was £2,000 as recently as 2022/23). Above that, dividends are taxed at 8.75% for basic rate, 33.75% for higher rate, and 39.35% for additional rate taxpayers. If you run a limited company and pay yourself in dividends, this change has probably cost you a fair bit.

The personal savings allowance lets basic rate taxpayers earn up to £1,000 in savings interest tax-free, and higher rate taxpayers get £500. With interest rates where they are right now, more people are exceeding these thresholds than at any point since they were introduced.

Related articles