Country guides
UK Income Tax and National Insurance Explained
Personal Allowance, the 20/40/45% bands, the 60% trap and how National Insurance stacks on top — UK take-home pay made simple.
By Praveen · 5 min read · Updated August 2026
Your Personal Allowance
Everyone in the UK gets a Personal Allowance — £12,570 in 2026/27 — that is taxed at 0%. You only start paying income tax on earnings above it. The allowance is frozen rather than rising with inflation, which quietly pulls more people into higher tax over time (so-called fiscal drag).
There's a sting for high earners: once you earn over £100,000, your allowance shrinks by £1 for every £2 above that, disappearing entirely at £125,140. This creates an effective 60% marginal tax band between £100,000 and £125,140 — one of the quirks our calculator captures automatically.
| Band | Taxable income | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic | £12,571–£50,270 | 20% |
| Higher | £50,271–£125,140 | 40% |
| Additional | Over £125,140 | 45% |
The three main bands
Above the allowance, England, Wales and Northern Ireland use three bands: 20% (basic) up to £50,270, 40% (higher) up to £125,140, and 45% (additional) above that. Only the income within each band is taxed at that band's rate — moving into the 40% band never reduces your take-home overall.
Scotland is different. It sets its own income tax with six bands, including a 19% starter rate and 42%, 45% and 48% rates higher up. A Scottish taxpayer on a large salary keeps slightly less than someone earning the same in England — our Scotland page breaks this down.
National Insurance on top
National Insurance (NI) is a second payroll deduction that funds the state pension and benefits. Employees pay 8% on earnings between £12,570 and £50,270, then 2% on everything above. Unlike income tax, NI is charged per pay period rather than annually, though the annual effect is similar for steady salaries.
Because NI's main rate falls to 2% above the upper limit while income tax rises to 40%, the combined marginal rate is actually highest in the middle of the income range, not at the very top — an unintuitive feature of the UK system worth knowing when you negotiate pay.
Student loans and pensions
Two more things shape your take-home. Student loan repayments act like an extra tax above a plan-specific threshold (commonly 9% above around £27,295 on Plan 2). And workplace pension contributions reduce your taxable pay, so paying into a pension can be surprisingly cheap in after-tax terms — especially for higher-rate taxpayers.
Our UK calculator lets you toggle a student loan plan and shows income tax and NI separately, so you can see exactly where each pound of a pay rise goes before you accept an offer.
The 60% band nobody legislated
Above £100,000 the Personal Allowance is withdrawn at £1 for every £2 of income, which means each additional £2 of salary both attracts 40% tax and exposes a further £1 of previously tax-free allowance to 40% tax. The arithmetic produces an effective marginal rate of about 60% across roughly £100,000 to £125,140, at which point the allowance is gone and the rate drops back.
Nobody set out to create a 60% band; it is the emergent consequence of a taper laid over a rate structure. It matters because it makes the standard advice backwards in that range: a pension contribution or a salary-sacrifice arrangement that brings adjusted income back under £100,000 is relieved at an effective 60%, which is the highest relief available to any UK taxpayer. If you are being offered a raise that lands in this band, the net figure is worth calculating before you celebrate it.
National Insurance is not a smaller income tax
Income Tax and National Insurance are charged on different bases and behave differently, which is why reasoning about UK take-home from the Income Tax table alone fails. Income Tax is cumulative across the year and uses your Personal Allowance; National Insurance is calculated separately in each pay period against its own thresholds and does not use the Personal Allowance at all.
The period-by-period basis has a practical consequence: irregular earnings pay more NI than the same annual total paid evenly. A month with a large bonus can push earnings above the Upper Earnings Limit for that month, where the rate drops, while quiet months fall below the Primary Threshold and pay nothing — but the arithmetic rarely nets out in your favour. NI also stops entirely at State Pension age even while Income Tax continues, which is why an older worker's take-home on the same salary can be noticeably higher.
Tax codes, and what to do when one is wrong
Your tax code is the instruction HMRC gives your employer about how much tax-free pay to apply. 1257L is the standard code for someone with the full Personal Allowance and no adjustments. A code ending in W1 or M1 is an emergency code operating on a non-cumulative basis, which typically means HMRC lacks your full year-to-date position — common after a job change.
A BR code taxes everything at the basic rate with no allowance, which is correct for a second job and wrong for a first one. K codes indicate that untaxed income or benefits exceed your allowance, so tax is added rather than relieved. Codes are frequently stale after a change in benefits, a company car, or a period of two concurrent jobs. Checking your code through a personal tax account and correcting it mid-year is far quicker than waiting for a year-end reconciliation.
Related
Frequently Asked Questions
+How much is £50,000 after tax in the UK?
On £50,000 in England (2026/27) you pay about £7,486 income tax and £3,000 National Insurance, leaving roughly £39,500 a year — about £3,290 a month. Scotland differs slightly. Use our UK calculator for your exact take-home.
+What is the 60% tax trap?
Between £100,000 and £125,140 your Personal Allowance is withdrawn at £1 for every £2 earned. Combined with 40% tax, this means each extra £1 in that band effectively costs about 60p in tax — a strong reason higher earners pay into pensions.
+Why is my effective marginal rate 60% between £100,000 and £125,140?
Because the Personal Allowance is withdrawn at £1 for every £2 above £100,000. Each extra £2 of salary is taxed at 40% and also exposes £1 of previously tax-free allowance to 40% tax, which works out at roughly 60% across the band. Pension contributions that bring adjusted income back below £100,000 are therefore relieved at that same effective rate.
+Does a bonus get taxed differently from salary in the UK?
No — it runs through PAYE as ordinary income. What changes is which thresholds it crosses. A bonus is very effective at pushing income past £50,270 into the higher rate, or past £100,000 into the allowance taper, so the tax on the bonus itself can look punitive even though no special bonus rate exists.
Estimate only — not tax advice. Figures are estimates based on publicly available tax rules and may not reflect your full circumstances. See our methodology & sources (last reviewed June 2026). Always confirm with an official tax authority or a licensed adviser before making decisions.