2 min read Income Tax

Understanding UK Income Tax Bands and Rates for 2025/26

A clear breakdown of UK income tax bands and rates for 2025/26, including the Personal Allowance, higher rate thresholds, and Scottish differences.
Understanding UK Income Tax Bands and Rates for 2025/26

The UK uses a progressive income tax system: you pay different rates on different portions of your income. Understanding the bands is essential for planning and for checking your PAYE tax code is correct.

The Personal Allowance

Every UK resident is entitled to a Personal Allowance of £12,570 for 2025/26 — income below this threshold is completely free of income tax. This figure has been frozen since April 2021 and remains frozen until at least April 2028. Your Personal Allowance reduces by £1 for every £2 earned above £100,000, disappearing entirely at £125,140 and creating an effective 60% marginal tax rate on that £25,140 band.

The Tax Bands

Income from £12,571 to £50,270 is taxed at the basic rate of 20%. Income from £50,271 to £125,140 is taxed at the higher rate of 40%. Income above £125,140 is taxed at the additional rate of 45%. These thresholds are frozen at 2025/26 levels.

A Practical Example

On a salary of £60,000 in England: £12,570 is tax-free; £37,700 (to £50,270) is taxed at 20%, giving £7,540; £9,730 (to £60,000) is taxed at 40%, giving £3,892. Total income tax: £11,432 — not including National Insurance.

Scotland

Scotland sets its own rates for non-savings, non-dividend income. Scottish taxpayers pay 19% (starter), 20% (basic), 21% (intermediate), 42% (higher), 45% (advanced), and 48% (top rate). Scottish rates do not apply to savings interest or dividends.

Savings Income

Basic rate taxpayers receive a Personal Savings Allowance of £1,000; higher rate taxpayers receive £500; additional rate taxpayers receive nothing. Savings interest above these allowances is taxed at your marginal income tax rate.

Dividend Income

The Dividend Allowance is £500 for 2025/26. Tax rates on dividends above the allowance: 8.75% (basic), 33.75% (higher), 39.35% (additional).

National Insurance

NI is calculated separately. Employees pay 12% on earnings from £12,570 to £50,270 and 2% above that. Combined with income tax, effective marginal rates are 32% (basic rate band) and 42% (higher rate band) for employees.

Planning

Pension contributions and Gift Aid donations extend your basic rate band. Increasing pension contributions can keep you below the £50,270, £100,000, or £125,140 thresholds, producing significant tax savings. Transferring income-producing assets to a lower-earning spouse also reduces overall household tax liability.

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