How income tax bands work (and why a pay rise never costs you)
The short answer: UK income tax is charged in slices. The first £12,570 is tax-free, income up to £50,270 is taxed at 20%, and only the money above £50,270 is taxed at 40%. Moving into a higher band never makes the whole salary 40%, so a pay rise cannot reduce your take-home pay.
The bands in 2026/27
| Band | Income | Rate |
|---|---|---|
| Personal allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
These apply in England, Wales and Northern Ireland. Scotland has different bands on earned income, so use the calculator’s region option.
What you actually pay
| Income | Income tax | Average rate |
|---|---|---|
| £20,000 | £1,486 | 7.4% |
| £30,000 | £3,486 | 11.6% |
| £50,270 | £7,540 | 15.0% |
| £60,000 | £11,432 | 19.1% |
| £100,000 | £27,432 | 27.4% |
Notice the average rate at £60,000: it is about 19%, not 40%, because only part of the income sits in the higher band.
The myth: “a pay rise pushes me into a higher band”
If you earn £50,270 and get a £1,000 pay rise, only that £1,000 is taxed at 40%. The extra tax is £400, so you keep £600 of it before National Insurance. You are always better off with the rise. The real exception is between £100,000 and £125,140, where the allowance is lost: see the 60% tax trap.
Allowances that move the bands
- Pension contributions extend your basic-rate band, so more income is taxed at 20%.
- Marriage allowance can transfer up to £1,260 of allowance between some couples.
- Your tax code tells your employer how much allowance to use. See tax codes explained.
How £60,000 is taxed, slice by slice
| Slice | Amount | Rate | Tax |
|---|---|---|---|
| Tax-free | £12,570 | 0% | £0 |
| Basic rate | £37,700 | 20% | £7,540 |
| Higher rate | £9,730 | 40% | £3,892 |
| Total | £60,000 | £11,432 |
Marginal rate versus average rate
Your marginal rate is the tax on your next pound: 0%, 20%, 40% or 45% depending where you are. Your average rate is your total tax divided by your income, which is always lower. At £60,000 the marginal rate is 40% but the average is 19.1%. When you decide about overtime, a bonus or a pension contribution, the marginal rate is what matters.
When the allowance is taken away
The tax-free allowance falls by £1 for every £2 of income above £100,000, and is gone by £125,140.
| Income | Personal allowance |
|---|---|
| £100,000 | £12,570 |
| £110,000 | £7,570 |
| £120,000 | £2,570 |
| £125,140 | £0 |
The Scottish bands
Scotland sets its own rates on earned income. For 2026/27 they are 19% on income from £12,571 to £16,537, 20% to £29,526, 21% to £43,662, 42% to £75,000, 45% to £125,140 and 48% above that. The tax-free allowance is the same. Savings and dividends are taxed at the UK-wide rates.
Do National Insurance and student loans use bands too?
Yes, but different ones. Employee National Insurance is 8% on pay between £12,570 and £50,270, and 2% above that. Student loan repayments are 9% of pay above your plan’s threshold. Neither follows the income tax bands exactly, so your effective rate on the next pound can be higher than the headline rate. See the take-home pay calculator for the combined result.
This is general information, not tax advice. Rates and thresholds are for 2026/27 and can change.
Common questions
How do income tax bands work?
Your income is split into slices. The first £12,570 is tax-free, the next slice up to £50,270 is taxed at 20%, and only the income above that is taxed at 40%. Each rate applies only to the slice in its band.
If I earn over £50,270, is all my income taxed at 40%?
No. Only the pounds above £50,270 are taxed at 40%. Everything below is taxed as before, so a pay rise never takes home less than before.
Can a pay rise leave me worse off?
Not because of the bands. The exception is the £100,000 to £125,140 range, where the tax-free allowance is withdrawn and the effective rate is 60%.
What are the Scottish income tax bands?
Scotland has its own bands and rates on earned income, with more steps than the rest of the UK. The tax-free allowance is the same.
What is the marginal rate?
The tax rate on your next pound of income. It is different from your average rate, which is your total tax divided by your total income.