UK Tax Brackets 2026/27: Complete Guide to Income Tax Rates & Thresholds

Understanding UK tax brackets is essential for knowing how much tax you will pay on your income. The UK tax system uses progressive tax brackets, meaning the more you earn, the higher percentage of tax you pay. However, this only applies to the income that falls within each bracket.

This system affects employees, self-employed individuals, landlords, and anyone else earning income in the UK. Yet many people do not fully understand how the brackets work, leading to surprises when they receive their tax bills or discover they are paying more tax than expected.

This guide explains the UK tax brackets for 2026/27 in clear, practical terms. We will walk you through each bracket, explain how personal allowances work, and show the differences between England, Wales, Northern Ireland, and Scotland. We will also explore the impact of frozen tax thresholds and include worked examples so you can see exactly how much tax you will pay at different income levels.

Want to calculate your exact tax bill? Use our Income Tax Calculator to see exactly how much tax you will pay.

Key Takeaways:

• Personal Allowance: £12,570 tax-free income for 2026/27
• Basic Rate: 20% on income from £12,571 to £50,270
• Higher Rate: 40% on income from £50,271 to £125,140
• Additional Rate: 45% on income above £125,140
• Scottish rates: Different system with six bands and higher rates up to 48%
• Fiscal drag: Frozen thresholds mean more taxpayers and higher tax bills by 2031

The Four Income Tax Brackets in England, Wales & Northern Ireland

For the 2026/27 tax year, England, Wales, and Northern Ireland use four income tax brackets. Each bracket has a different tax rate, and your income is taxed at each rate as it passes through each bracket. This progressive system means you never pay the highest rate on all your income, only on the amount that exceeds the higher rate threshold.

Personal Allowance (0%)

Income from £0 to £12,570 is completely tax-free. This is the first bracket and represents a significant chunk of income that will not be touched by the taxman. The personal allowance applies to all income types, including salary from employment, self-employment profits, rental income, savings interest, and dividends. However, if you have untaxed income such as rental income or dividends, the personal allowance is applied to employment or pension income first, with any remaining allowance available for other income sources. The personal allowance has been set at this level since April 2022 and is due to remain there until April 2031.

Basic Rate (20%)

Income from £12,571 to £50,270 is taxed at 20%. This is by far the largest bracket by income range and affects the vast majority of UK taxpayers. A basic rate taxpayer is someone whose total taxable income does not exceed £50,270. The basic rate applies to employment income, self-employment profits, rental income, pension income, and savings interest above your Personal Savings Allowance. Basic rate taxpayers receive a Personal Savings Allowance of £1,000, meaning the first £1,000 of savings interest is tax-free even if your total income exceeds £12,570.

Higher Rate (40%)

Income from £50,271 to £125,140 is taxed at 40%. You become a higher rate taxpayer once your total taxable income exceeds £50,270. Higher rate taxpayers include successful self-employed individuals, senior employees, experienced professionals, and landlords with significant rental income. An important point to understand is that once you enter the higher rate bracket, only the income exceeding £50,270 is taxed at 40%. The first £50,270 of your income is still taxed at basic rate. For higher rate taxpayers, the Personal Savings Allowance reduces to just £500, meaning any savings interest above this is taxed at 40%.

Additional Rate (45%)

Income above £125,140 is taxed at 45%, the highest income tax rate. Additional rate taxpayers are relatively rare, only those earning substantially over £125,000 fall into this bracket. These might include senior business executives, established entrepreneurs, highly specialist professionals, and partners in successful professional firms. Additional rate taxpayers receive no Personal Savings Allowance, meaning all savings interest is taxed at 40% or 45% depending on their rate band. The additional rate of 45% applies only to income above £125,140.

All four brackets remain frozen in cash terms through to April 2031. The Chancellor confirmed in the 2025 Budget that thresholds will not be increased in line with inflation, meaning the frozen brackets will create what is known as "fiscal drag", effectively increasing the tax burden on UK earners as wages rise but tax thresholds stay flat.

The Personal Allowance & the £100,000 Trap

The Personal Allowance of £12,570 is one of the most important tax reliefs available to UK taxpayers, as it provides a significant amount of tax-free income. For basic rate and higher rate taxpayers, the Personal Allowance reduces their tax liability substantially. However, there is a complex rule that catches high earners and creates what is sometimes called the £100,000 trap.

When your total income exceeds £100,000, your Personal Allowance begins to reduce. Specifically, you lose £1 of Personal Allowance for every £2 of income you earn above £100,000. This taper continues until your Personal Allowance disappears entirely at £125,140 in income. The trap occurs because this taper creates an effective tax rate of 60% on income between £100,000 and £125,140, which is higher than the 40% higher rate that applies to income below £100,000.

To understand this, consider someone earning £100,000 earning an additional £1,000. That additional £1,000 reduces their Personal Allowance by £500, and the remaining £500 is taxed at 40%. The result is £400 tax on that £1,000, an effective rate of 40%. But the loss of Personal Allowance itself represents a 20% tax, meaning the combined impact is 60%. This situation continues for every pound earned until the Personal Allowance disappears at £125,140, after which the effective rate drops back to 40%.

This high effective rate between £100,000 and £125,140 has significant implications for high earners, company directors, and anyone with multiple income sources pushing them over the £100,000 threshold. Understanding this trap is crucial for tax planning. Making a pension contribution of £25,140 would reduce income from £125,140 to £100,000, eliminating the entire Personal Allowance taper effect and saving 60% tax on the contribution amount, compared to 40% for lower income earners.

Pension Contributions and Tax Relief

Pension contributions are one of the most effective ways to reduce your tax liability. However, the way tax relief works depends on the type of pension arrangement you have.

Relief at Source

Under relief at source, your pension provider adds basic rate (20%) tax relief to your contributions. If you pay £100 into your pension, it costs you £80 and the provider claims £20 from HMRC. Higher and additional rate taxpayers can claim the extra relief (20% or 25% of the contribution) through Self Assessment or by contacting HMRC.

Net Pay Arrangements

Under net pay arrangements, your pension contribution is deducted from your pay before tax is calculated. This means you get tax relief at your marginal rate automatically. A higher rate taxpayer paying £100 into their pension effectively gets £40 tax relief, with only £60 coming from their take-home pay.

Salary Sacrifice

Under salary sacrifice, you agree to reduce your salary in exchange for your employer making pension contributions on your behalf. This saves both Income Tax and National Insurance contributions on the sacrificed amount. However, it reduces your salary for some purposes, including mortgage applications and some state benefits.

Extension of the Basic Rate Band

Pension contributions made under relief at source or net pay arrangements can extend your basic rate band. If your income would otherwise fall into the higher rate band, pension contributions can keep more of your income in the basic rate band, reducing your overall tax bill.

Adjusted Net Income

For higher rate taxpayers, pension contributions reduce your adjusted net income. This can be particularly valuable if your income is between £100,000 and £125,140, as reducing your adjusted net income below £100,000 restores your Personal Allowance, saving tax at an effective rate of 60% on the contribution.

The annual allowance for pension tax relief is £60,000 for 2026/27. Higher earners with income over £260,000 may have their annual allowance tapered.

GOV.UK guidance on pension tax relief provides full details of how tax relief works for different pension arrangements.

Scottish Income Tax: A Different System

Scotland operates a completely different income tax system from England, Wales, and Northern Ireland, with six separate tax bands instead of four. If you are resident in Scotland for tax purposes, you are subject to Scottish income tax rates on non-savings income including employment income, self-employment profits, and pension income. Scottish income tax rates are higher than the rest of the UK at each band, though the lower income thresholds are adjusted to partially offset this.

The Scottish Personal Allowance for 2026/27 is £12,570, the same as the rest of the UK. Income from £12,571 to £16,537 is taxed at the Scottish starter rate of 19%. This lower rate applies to the first portion of taxable income in Scotland, providing a stepping stone into the tax system. From £16,538 to £29,526, income is taxed at the basic rate of 20%, the same as England. The intermediate rate applies from £29,527 to £43,662 at 21%, creating an additional bracket not found elsewhere in the UK. From £43,663 to £75,000, income is taxed at the higher rate of 42%, and from £75,000 to £125,140, a second higher rate of 45% applies. Finally, income above £125,140 is taxed at the top rate of 48%.

The practical effect is that a Scottish taxpayer pays more tax than an English taxpayer on the same income. Someone earning £40,000 in Scotland pays approximately £826 more in income tax than in England. For savings and dividend income, Scottish taxpayers pay the same rates as the rest of the UK, as these income types are specifically excluded from Scottish income tax.

The Impact of Frozen Tax Thresholds: Fiscal Drag

One of the most significant developments affecting UK taxpayers over recent years is the freeze in income tax thresholds. Since April 2021, the Personal Allowance, basic rate threshold, higher rate threshold, and additional rate threshold have been frozen in cash terms. The government has confirmed this freeze will continue until April 2031, meaning that for ten years in total, tax thresholds will not increase even as inflation and wages rise.

This creates a phenomenon known as fiscal drag, where the government's tax take increases without raising tax rates. When your salary increases due to inflation or promotion, but the tax brackets stay frozen, a larger percentage of your income falls into higher tax brackets than previously, resulting in higher tax bills as a proportion of your income. The effect is equivalent to a hidden tax rise, you are paying more tax without the government officially increasing tax rates.

The fiscal drag impact will be substantial by the end of the freeze period. According to the Office for Budget Responsibility, the freeze of income tax thresholds until 2030/31 will raise over £55 billion. By the end of the forecast period, an extra 5.2 million individuals are expected to be paying the basic income tax rate of 20% who currently do not. A further 4.8 million will move into the higher 40% rate for those earning between £50,271 and £125,140 annually. Another 600,000 will move into the top 45% rate of tax for the highest earners.

For working pensioners, the impact is particularly pronounced. The state pension increases each year under the "triple lock" guarantee, but the Personal Allowance does not. By 2027/28, the full state pension is currently expected to exceed the Personal Allowance for the first time, meaning many state pensioners who currently pay no income tax will find themselves becoming taxpayers simply because the state pension increase is not matched by an increase in the Personal Allowance.

The freeze also creates particular hardship for basic rate taxpayers working in public sector roles with modest pay growth, and for self-employed individuals whose income grows gradually but who are not yet reaching the higher rate threshold. Someone earning £40,000 today and receiving 3% annual pay rises will find an increasing proportion of their income at risk of moving into the higher rate bracket before the freeze ends in 2031.

How Much Tax Will You Pay? Worked Examples

Understanding tax brackets in theory is helpful, but seeing worked examples makes the concept concrete. Let us work through several income levels to see exactly how much tax is paid at each level and how the brackets apply.

Example 1: £25,000 Annual Salary (Basic Rate Taxpayer)

Taxable income: £25,000 minus Personal Allowance of £12,570 = £12,430 taxable income. All of this falls within the basic rate band (£12,571 to £50,270), so it is taxed at 20%. Tax due: £12,430 × 20% = £2,486. Annual tax bill: £2,486. Take-home pay: £22,514.

Example 2: £50,000 Annual Salary (Basic Rate Taxpayer)

Taxable income: £50,000 minus Personal Allowance of £12,570 = £37,430 taxable income. All of this falls within the basic rate band, so it is taxed at 20%. Tax due: £37,430 × 20% = £7,486. Annual tax bill: £7,486. Take-home pay: £42,514.

Example 3: £60,000 Annual Salary (Higher Rate Taxpayer)

Taxable income: £60,000 minus Personal Allowance of £12,570 = £47,430 taxable income. First £37,700 (from £12,571 to £50,270) is taxed at basic rate: £37,700 × 20% = £7,540. Remaining £9,730 is above the higher rate threshold and taxed at 40%: £9,730 × 40% = £3,892. Total tax: £7,540 + £3,892 = £11,432. Take-home pay: £48,568.

Example 4: £100,000 Annual Salary (Higher Rate Taxpayer)

Taxable income: £100,000 minus Personal Allowance of £12,570 = £87,430 taxable income. First £37,700 at basic rate: £37,700 × 20% = £7,540. Remaining £49,730 at higher rate: £49,730 × 40% = £19,892. Total tax: £27,432. Take-home pay: £72,568.

Example 5: £110,000 Annual Salary (Personal Allowance Taper)

Taxable income: £110,000. Personal Allowance reduction: (£110,000 - £100,000) ÷ 2 = £5,000 reduction. New Personal Allowance: £12,570 - £5,000 = £7,570. Taxable income: £110,000 - £7,570 = £102,430. First £37,700 at basic rate: £37,700 × 20% = £7,540. Remaining £64,730 at higher rate: £64,730 × 40% = £25,892. Total tax: £33,432. Take-home pay: £76,568.

Note the difference: moving from £100,000 to £110,000 (a £10,000 increase) results in an increase in tax from £27,432 to £33,432 (a £6,000 increase). This represents a 60% marginal tax rate due to the Personal Allowance taper, much higher than the 40% that would apply below £100,000.

Example 6: £130,000 Annual Salary (No Personal Allowance)

Taxable income: £130,000 (Personal Allowance has reduced to £0 at £125,140). First £37,700 at basic rate: £37,700 × 20% = £7,540. Next £74,440 at higher rate: £74,440 × 40% = £29,776. Remaining £17,860 at additional rate: £17,860 × 45% = £8,037. Total tax: £45,353. Take-home pay: £84,647.

These examples show clearly how the brackets work in practice and why understanding where your income falls within the brackets matters for tax planning.

Other Tax Allowances & Reliefs That Reduce Your Tax Bill

Beyond the Personal Allowance, several other allowances and reliefs can reduce your income tax bill. Understanding these and claiming them correctly can save substantial amounts of tax.

The Personal Savings Allowance provides tax-free interest for employed people and pensioners. Basic rate taxpayers get £1,000 of tax-free savings interest, higher rate taxpayers get £500, and additional rate taxpayers get none. This allowance applies automatically, you do not need to claim it, but only for savings income from banks and building societies.

The Dividend Allowance provides tax-free dividend income before the higher dividend tax rates apply. This is £500 for 2026/27. Dividend income above this is taxed at 10.75% for basic rate taxpayers, 35.75% for higher rate taxpayers, and 39.35% for additional rate taxpayers. For many investors, planning dividend distributions to stay within or near the Dividend Allowance can save significant tax.

Marriage Allowance allows married couples and civil partners where one earns less than the Personal Allowance to transfer unused allowance to their partner. The transfer is worth up to £252 in tax savings per year. While the tax saving is modest, it is free money if you are eligible, yet thousands of couples do not claim it.

The Trading Allowance provides tax relief for self-employed people and property investors by allowing up to £1,000 of business income to be earned tax-free each year. This means sole traders with annual business profits below £1,000 pay no income tax on that profit.

National Insurance: Another Layer of Tax on Income

While not technically income tax, National Insurance contributions function as another tax on earnings and are collected by HMRC alongside income tax. Understanding National Insurance is important because it adds to the effective tax rate on your income.

For employees, National Insurance is deducted from your salary at 8% on earnings between £12,570 and £50,270, and 2% above this threshold. This is calculated each time you get paid, so you could pay different amounts if your pay changes each time.

Employers also pay National Insurance at 15% on earnings above the secondary threshold (£5,000 per year). The employer rate increased from 13.8% to 15% in April 2025, and the secondary threshold was reduced from £175 per week to £96 per week.

For self-employed people, Class 2 contributions are £3.65 per week on profits above the Small Profits Threshold (£7,105), though you do not have to pay if your profits are below £12,570. Class 4 contributions are 6% on profits between £12,570 and £50,270, and 2% on profits above this.

Combined income tax and employee National Insurance reaches 42% for higher rate employees (40% tax + 2% NI) and 48% for additional rate employees (45% tax + 2% NI). These marginal rates are often overlooked but are crucial when considering salary increases, bonus structures, or whether to operate as a company or sole trader for tax planning purposes.

Final Thoughts

Understanding your tax bracket and how much of your income falls within each bracket helps you make informed financial decisions, evaluate the real cost of salary increases, and plan your finances effectively. Tax brackets are not just theoretical, they directly impact how much of every additional pound you earn stays in your pocket.

For a full view of your tax position, see our Income Tax Calculator. For self-employed readers, try our Self-Employed Tax Calculator.

Official Sources and Further Reading

GOV.UK Official Guidance:

• Income Tax Rates and Personal Allowances - Official GOV.UK rates page
• Estimate Your Income Tax - HMRC's calculator for your expected tax bill
• Scottish Income Tax - Information on Scottish rates and who pays them
• Personal Savings Allowance - Tax-free interest limits
• Marriage Allowance - Transfer unused allowance to your partner
• Dividend Allowance - Tax-free dividend income

This guide provides general information about UK tax brackets for 2026/27. Individual circumstances vary significantly. For personalised advice about your specific situation, consult a qualified tax adviser or accountant. Always check GOV.UK for current rates and guidance.