UK Income Tax Bands and Rates Explained

One of the most common misunderstandings we see: people think crossing into a higher tax band means all their income gets taxed at that rate. It doesn't. The UK system is progressive — only the income within each band is taxed at that band's rate.

The Personal Allowance

Most people can earn £12,570 before paying any Income Tax at all. This is your Personal Allowance, and it applies automatically unless your income is very high.

If you earn over £100,000, your Personal Allowance starts reducing — by £1 for every £2 earned above that threshold — and disappears entirely once income reaches £125,140. This creates an effective tax rate of 60% on income in that band, which catches a lot of people by surprise.

The bands

A worked example

Say you earn £60,000. You don't pay 40% on the whole amount — only on the slice above £50,270. Roughly:

• £0 tax on the first £12,570
• 20% on the next £37,700 (up to £50,270)
• 40% on the remaining £9,730

Your total tax bill is meaningfully less than "40% of £60,000" — a difference people often don't realise until they see it broken down.

Don't forget National Insurance

Income Tax isn't the whole picture. Employees and the self-employed also pay National Insurance on earnings, which is calculated separately and has its own thresholds — worth factoring into any real take-home pay calculation.

Scotland is different

If you're a Scottish taxpayer, Income Tax bands and rates differ from the rest of the UK — Scotland sets its own thresholds and has more bands. Always check the Scottish rates specifically if that applies to you.

These thresholds have been frozen for several years rather than rising with inflation, which quietly pulls more people into higher bands each year — worth factoring into any long-term tax planning.