Income Tax in England, Wales and Northern Ireland is worked out in slices. You do not pay one rate on everything — you pay each rate only on the part of your income that falls in its band. (Scotland sets its own bands; see the Scottish income tax guide.)
The 2026/27 bands
| 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% |
The Personal Allowance
The first £12,570 you earn is tax-free. This is your Personal Allowance, and for most people it is reflected in the tax code 1257L. Above it, the basic rate of 20% applies up to £50,270.
Marginal rates: only the top slice is taxed more
A common worry is that crossing into the 40% band means "losing 40% of everything". It does not. If you earn £55,000, only the £4,730 above £50,270 is taxed at 40% — the rest follows the 20% rate and your allowance. So a pay rise that nudges you into the higher band still leaves you better off; only the extra slice is taxed more.
Your marginal rate — the rate on your next pound — is what matters for decisions like overtime, a bonus, or a pension contribution. At £55,000 your marginal rate is 40%; at £30,000 it is 20%.
The 60% band you won't see in the table
Between £100,000 and £125,140 there is an effective 60% rate, because your Personal Allowance is gradually withdrawn. It is not a separate band, but it behaves like one — we cover it fully in the £100,000 tax trap guide.
Frozen thresholds and "fiscal drag"
The Personal Allowance and the higher-rate threshold have been frozen and are set to stay frozen until April 2031. Because they do not rise with inflation or pay, more people are pulled into higher bands each year as wages climb — an effect known as fiscal drag. In real terms, a frozen threshold is a quiet tax rise.
What else comes off your pay
Income Tax is only part of the story. National Insurance takes another 8% (then 2%) of your earnings, and a pension or student loan changes the picture again. To see all of it together for your salary, use the take-home pay calculator; the salary pages show a worked breakdown for any figure.
In short
Tax is charged slice by slice: nothing until £12,570, then 20%, then 40% above £50,270, then 45% above £125,140 — with a 60% pinch in between at £100,000. Knowing your marginal rate is the single most useful number for any money decision.