Income Tax & Take-Home Pay

How UK income tax and take-home pay works

Income tax bands and the personal allowance

In England, Wales and Northern Ireland, income tax is charged in layers on top of a tax-free personal allowance of £12,570 (2026/27). You only pay tax on income above this threshold. The basic rate of 20% applies to income between £12,571 and £50,270 — a band of £37,700. The higher rate of 40% kicks in between £50,271 and £125,140. Above £125,140, the additional rate of 45% applies.

These rates are marginal — you only pay the higher rate on the slice of income above each threshold. So a salary of £60,000 does not mean all of it is taxed at 40%; only the £9,730 above £50,270 is taxed at that rate.

The £100,000 personal allowance taper

Once your adjusted net income exceeds £100,000, the personal allowance reduces by £1 for every £2 of income above that level. This means the personal allowance reaches zero at £125,140. This creates an effective 60% marginal tax rate on income between £100,000 and £125,140 — the 40% higher rate plus the loss of 20p of tax-free allowance for every £2 earned. Pension contributions can be very effective at reducing income back below £100,000 to recover the personal allowance.

Scotland: different income tax rates

Scotland has devolved income tax rates set by the Scottish Government. In 2026/27 there are six bands compared to England's three. The starter rate of 19% applies up to £14,876. Above that, a 20% basic rate runs to £26,561, then a 21% intermediate rate to £43,662. Scotland's higher rate is 42% (vs 40%) on income between £43,663 and £75,000, followed by an advanced rate of 45% up to £125,140, and a top rate of 48% on income above £125,140. National Insurance contributions are the same across all of the UK.

National Insurance contributions

Employee Class 1 National Insurance is charged at 8% on earnings between £12,570 (the Primary Threshold) and £50,270 (the Upper Earnings Limit). Above £50,270, the rate drops to just 2%. NI and income tax thresholds are currently frozen until at least April 2028, meaning more people are being pushed into higher thresholds each year by wage growth — sometimes called "fiscal drag".

Pension contributions and tax relief

Contributing to a workplace or personal pension reduces your taxable income. If your employer uses "relief at source", pension contributions are deducted from your gross pay before tax is calculated — so every £80 you put in costs you £80, but the pension provider claims 20% basic rate relief, making the gross contribution £100. Higher and additional rate taxpayers can claim further relief through Self Assessment. This calculator assumes relief at source and deducts your pension percentage from gross pay before calculating both income tax and National Insurance.

Student loan repayments

Student loan repayments are calculated as a percentage of income above a repayment threshold, deducted through PAYE much like income tax. Plan 1 (started before September 2012) has a threshold of £24,990 with 9% deducted above that. Plan 2 (started after 2012 in England or Wales) has a threshold of £27,295 at 9%. Plan 4 is for Scottish loans, with a threshold of £31,395 at 9%. Postgraduate loans use a 6% rate above £21,000. Repayments are based on income, not on the loan balance — so higher earners repay faster.