UK Tax 2026/27 Explained

Income tax: England, Wales and Northern Ireland

Most of the UK shares one income tax system. You pay nothing on the first £12,570 — the personal allowance — then 20% on taxable pay from £12,571 to £50,270, 40% from £50,271 to £125,140, and 45% above £125,140. The crucial point, endlessly misunderstood, is that the rates apply only to the slice of income inside each band. A £55,000 salary does not pay 40% on £55,000; it pays 20% up to £50,270 and 40% only on the £4,730 above it.

Taxable pay is not the same as gross pay. Pension contributions made by salary sacrifice come off first — on £35,000 with 5% auto-enrolment, £1,438 is sacrificed, leaving £33,562 — and then the £12,570 allowance comes off, leaving £20,992 taxed at 20% = £4,198.40. That is the engine's verified figure, and it reconciles exactly.

The table above carries the worked £35,000 case so you can see each band doing its job. For any other salary, the take-home pay calculator runs the same arithmetic with the nation toggle set to England.

Income tax: Scotland

Scotland sets its own income tax on employment income, with six bands instead of three rates. The personal allowance is the same £12,570, but above it the system diverges immediately: a 19% starter rate, then 20%, 21%, 42%, 45% and 48%. The headline difference is where the higher rate begins — £43,663 in Scotland against £50,271 in England — which is why Scotland costs more at most incomes above the mid-twenties.

On the engine's verified £40,000 run, Scotland's income tax is £5,196.59, against pension of £1,688 and National Insurance of £2,059.36, leaving take-home of £31,056.05 (£2,588.00 a month). Worked from the published English bands, the same £40,000 would pay £5,148.40 — the Scottish system costs £48.19 more here, and the gap widens with every pay rise because the 42% band arrives so much earlier.

Everything else about Scottish employment is identical: the same National Insurance, the same pension rules, the same student loan plans. Only the income tax bands differ — but they differ enough that an England-based calculator is useless north of the border.

• Starter: 19% on £12,571 to £16,537.
• Basic: 20% on £16,538 to £29,526.
• Intermediate: 21% on £29,527 to £43,662.
• Higher: 42% on £43,663 to £75,000.
• Advanced: 45% on £75,001 to £125,140.
• Top: 48% above £125,140.

The personal allowance and the £100,000 taper

The £12,570 personal allowance is not guaranteed. Above £100,000 of adjusted net income it is withdrawn at £1 for every £2 earned, vanishing entirely at £125,140. Between those two points the effective marginal income tax rate is 60%: 40% higher-rate tax plus the withdrawn allowance, which is worth another 20%.

See it worked: at £110,000, the withdrawn amount is (110,000 − 100,000) ÷ 2 = £5,000, so the allowance is 12,570 − 5,000 = £7,570. An extra £1,000 earned in the taper zone costs £400 of tax plus £200 of lost allowance — £600 before National Insurance touches it. This is the steepest marginal rate in the mainstream system, steeper than the 45% additional rate.

Salary-sacrificed pension contributions reduce the income counted for the taper, which makes pension saving between £100,000 and £125,140 the best-value tax planning available to most employees. Sacrificing enough to stay at or under £100,000 preserves the full allowance and sidesteps the 60% zone completely.

• Taper starts at £100,000; allowance fully withdrawn at £125,140.
• At £110,000 the personal allowance is £7,570.
• Effective marginal rate in the taper zone: 60% before National Insurance.
• Salary-sacrifice pension contributions reduce income counted for the taper.

National Insurance: the second tax

Employees pay Class 1 National Insurance at 8% on earnings between the Primary Threshold of £12,570 and the Upper Earnings Limit of £50,270, and 2% on everything above. Unlike income tax there is no taper at £100,000 and no additional-rate cliff — just the two rates, which makes NI the simpler but less visible half of the deduction pair.

Payroll runs it weekly or monthly, so the equivalents matter: the Primary Threshold is £242 a week or £1,048 a month, and the Upper Earnings Limit is £967 a week or £4,189 a month. Earn £1,000 in a week and you pay 8% on £758 of it; earn £1,000 in a month and you pay 8% on nothing, because the monthly threshold is £1,048. Same annual pay, different payroll arithmetic — which is why the annual figures are the ones to trust.

Salary sacrifice reduces NI as well as income tax, because the sacrificed salary is not earnings for NI purposes. On the verified £35,000 run, NI is £1,679.36 — calculated on £33,562 after the £1,438 pension — rather than the £1,794.40 it would be without sacrifice. That £115.04 annual saving is the quiet half of the salary-sacrifice benefit.

One change is already legislated: from April 2029, the employer National Insurance relief on salary-sacrificed pension contributions above £2,000 a year is removed. It affects what your employer's sacrifice arrangement costs them, not your deductions directly — but arrangements may be restructured, so it is worth knowing it is coming.

• 8% from £12,570 to £50,270; 2% above £50,270.
• Weekly: £242 to £967. Monthly: £1,048 to £4,189.
• Salary sacrifice reduces NI as well as income tax.
• From April 2029, employer NIC relief on salary-sacrificed pension above £2,000 is removed.

Student loans: the third deduction

For graduates, a third deduction sits alongside tax and National Insurance: student loan repayments of 9% of gross earnings above the plan threshold — 6% above £21,000 for postgraduate loans. It is not a tax — it stops when the loan is cleared or written off — but on a monthly payslip it behaves like one, and it is calculated on gross pay after everything else.

The 2026/27 thresholds: Plan 1 £26,900, Plan 2 £29,385, Plan 4 (Scotland) £33,795, Plan 5 £25,000, postgraduate £21,000. On £35,000, a Plan 2 graduate pays (35,000 − 29,385) × 9% = £505.35 a year, or £42.11 a month. The same graduate with a postgraduate loan pays another (35,000 − 21,000) × 6% = £840 on top — £1,345.35 combined.

Two freezes shape the graduate outlook. The Plan 2 threshold is frozen at £29,385 from April 2027 to April 2030, so every pay rise in that window increases the 9% bill. And Plan 5's 40-year write-off (against 30 years for Plans 1 and 2) means far more borrowers will repay in full. Graduates face fiscal drag from two directions at once.

• 9% of earnings above threshold (6% for postgraduate loans), on gross pay.
• Plan 1 £26,900; Plan 2 £29,385; Plan 4 £33,795; Plan 5 £25,000; postgraduate £21,000.
• £35,000 on Plan 2 = £505.35 a year (£42.11/month).
• Plan 2 threshold frozen April 2027 to April 2030; Plan 5 write-off after 40 years.

Pensions: auto-enrolment in 2026/27

If you are 22 or over, earn more than £10,000 a year and work in the UK, your employer must enrol you in a workplace pension. The minimum total contribution is 8% of qualifying earnings — 3% from your employer, 5% from you — and qualifying earnings are the slice of salary between £6,240 and £50,270. Earn £35,000 and your qualifying earnings are £28,760, so your 5% is £1,438 a year and your employer's 3% is £862.80.

You can opt out, but the maths argues against it for most people: the employer contribution is free money, and the tax relief on your share is automatic. Taken by salary sacrifice — the arrangement most large employers use — your £1,438 on £35,000 saves £287.60 of income tax and £115.04 of National Insurance, so the true cost to your take-home is £1,035.36 for £2,300.80 going into the pension including the employer share.

The £10,000 trigger and the £6,240 lower limit mean very low earners and part-time workers can fall outside auto-enrolment entirely. If you earn between £6,240 and £10,000 you can opt in and your employer must contribute; below £6,240 you can join but they do not have to pay in. Check which side of the lines you are on — the lines, not your job title, decide.

• Auto-enrolment from age 22 on earnings above £10,000.
• Minimums: 3% employer, 5% employee — 8% total of qualifying earnings.
• Qualifying earnings: £6,240 to £50,270.
• On £35,000: you pay £1,438, your employer pays £862.80.

Dividends and savings: what changed in April 2026

From 6 April 2026, dividend tax rose by 2 percentage points across the board: 10.75% in the basic-rate band, 35.75% in the higher-rate band, and 39.35% in the additional-rate band. The dividend allowance stays at £500, so the first £500 of dividends is tax-free and the new rates apply above it. Company directors and investors drawing dividends pay noticeably more than they did in 2025/26 — on £10,000 of dividends above the allowance, the basic-rate bill rose from £787.50 to £967.50.

Savings got a quieter deal this year: the starting rate for savings remains 0% on the first £5,000 of interest for those whose non-savings income is low. But savers should read the next section — from 6 April 2027, tax on savings and property income rises by 2 percentage points to 22%, 42% and 47%, already legislated and waiting.

These changes matter to employees too, not just directors. Anyone with dividends from shares, savings interest above their allowances, or rental income faces the new rates. These calculators model employment income; investment income needs its own arithmetic, and the rates above are the ones to use.

Frozen until 2031: why your tax bill keeps rising

The Autumn Budget 2025 froze the personal allowance (£12,570), the basic-rate limit (£50,270), the higher-rate threshold (£125,140) and every Scottish band until 5 April 2031. Nothing about the rate structure changes for the rest of the decade — and that is precisely the point. With thresholds fixed and wages rising, the Exchequer collects more each year without ever announcing a tax rise.

The mechanics are simple and relentless. A worker on £48,000 getting a 4% rise moves to £49,920 — still basic rate, but £1,920 more of income taxed at 20% instead of 0%. A worker on £49,000 getting the same rise crosses £50,270 and pays 40% on the slice above. A worker on £98,000 enters the £100,000 taper zone, where the marginal rate is 60%. None of them had a “tax rise”; all of them pay more tax.

The freeze also fixes the value of this guide. In years when thresholds moved annually, last year's tax page was last year's news. With the freeze running to 2031, the 2026/27 figures remain the working figures for years — updated here only when the rules themselves change, which is exactly what the pay-rise alerts exist to tell you about.

• Personal allowance and all income tax thresholds frozen to 5 April 2031.
• Every pay rise drags more income into tax or into higher bands — fiscal drag.
• The £50,270 and £100,000 boundaries are where the freeze bites hardest.
• Scottish bands are frozen on the same timetable.

On the horizon: 2027 and 2029

Two tax rises are already legislated and waiting in the wings. From 6 April 2027, income tax on savings and property income rises by 2 percentage points: the basic rate becomes 22%, the higher rate 42%, and the additional rate 47%. Employment income is unaffected — your PAYE bands do not change — but landlords and savers with significant interest should be planning now, a full tax year ahead.

From April 2029, the employer National Insurance relief on salary-sacrificed pension contributions above £2,000 a year is removed. This one lands on employers' costs rather than your payslip directly: sacrificing £5,000 into your pension currently saves your employer NIC on the full amount, and from 2029 the relief stops above £2,000. Some employers will restructure their sacrifice arrangements in response; if yours does, check that your take-home modelling still holds.

Neither change is reflected in the 2026/27 calculators, because neither applies in 2026/27. They are flagged here — and in the pay-rise alerts — so that when they arrive, they arrive as expected rather than as a nasty April surprise. A tax system with frozen thresholds and pre-announced rises rewards the planners; this page is written for them.

• 6 April 2027: savings and property income tax rises 2pp to 22%, 42%, 47%.
• April 2029: employer NIC relief on salary-sacrificed pension above £2,000 removed.
• Neither change affects 2026/27 PAYE — both are flagged here for planning.
• The pay-rise alerts will cover both changes as their start dates approach.

How this page is maintained

This is the canonical tax reference for privatesectorcalculators.co.uk. Every calculator on the site — take-home pay, night-shift premium, overtime, student loan, HGV driver tools and armed forces tools — draws its rates from the model documented here. When the model and this page disagree, this page is wrong and gets fixed.

Figures are checked against gov.uk sources each tax year and after every Budget or fiscal event. The review date below shows the last check. Sign up for the pay-rise alerts and you will hear about changes that affect your pay the week they are announced, not the April they take effect.