How UK Income Tax Works in 2026/27

Income tax is the biggest deduction on most UK payslips, and also the most misunderstood. The single most common misconception is that moving into a higher band taxes your whole salary at the higher rate. It never does. The UK system is marginal: each rate only applies to the slice of income that falls inside its band.

The 2026/27 bands for England, Wales and Northern Ireland

For the tax year running 6 April 2026 to 5 April 2027, the bands are unchanged from last year because thresholds remain frozen:

Scotland sets its own bands for earned income, with six rates from 19% to 48%. If you live in Scotland, the starter rate applies up to £16,538 and the higher 42% rate starts at £43,663. Our salary calculator applies the Scottish bands automatically when you select Scotland.

A worked example

Take a £60,000 salary in England. Nothing is paid on the first £12,570. The next £37,700 is taxed at 20% (£7,540). The remaining £9,730 above £50,270 is taxed at 40% (£3,892). Total income tax: £11,432, an effective rate of about 19%, even though the marginal rate is 40%. National Insurance and any pension or student loan deductions come on top; see our National Insurance guide for that side of the payslip.

The 60% trap between £100,000 and £125,140

Above £100,000 of adjusted net income, you lose £1 of Personal Allowance for every £2 you earn. Losing tax-free allowance while paying 40% on the extra income produces an effective marginal rate of 60% in this band. It is the most expensive stretch of the entire UK tax system, and the standard escape route is pension contributions, which reduce adjusted net income and restore the allowance. Our pensions and salary sacrifice guide covers exactly how that works.

Frozen thresholds and fiscal drag

The Personal Allowance and the £50,270 higher-rate threshold have been frozen since 2021 and remain frozen in 2026/27. As wages rise with inflation, more of each pay rise falls into higher bands without any rate officially increasing. This quiet mechanism, known as fiscal drag, is why a 5% pay rise rarely feels like 5% in your pocket, and why record numbers of people now pay higher-rate tax.

How the tax is actually collected

Most employees pay income tax through PAYE (Pay As You Earn): your employer deducts tax from each payslip based on your tax code, spreading your allowance evenly across the year. The code, usually 1257L, controls how much of your pay is treated as tax free. A wrong code means paying the wrong tax from the very first payslip, so it is worth checking. Our tax codes guide explains how to read yours and fix mistakes.

If you earn income outside PAYE, from self-employment, dividends above £500, or savings interest above your Personal Savings Allowance, you may need to report it through Self Assessment. The deadline for online returns is 31 January following the end of the tax year.

Check your own numbers

The fastest way to see how these bands apply to you is to run your salary through the take-home pay calculator, which itemises income tax, National Insurance, pension and student loan deductions for 2026/27, or browse salary tables for a quick comparison across pay levels.