Learn › Income tax basics in the United Kingdom

In short: As of 2026, the UK gives a tax-free personal allowance of £12,570. Above that, England, Wales and Northern Ireland tax income at 20% (basic), 40% (higher) and 45% (additional). Scotland sets its own bands, ranging from 19% up to 48%. National Insurance is charged separately, and the tax year runs from 6 April to 5 April.

Income tax basics in the United Kingdom

Kontoo editorial team · Updated 06/24/2026 · 6 min read

In the United Kingdom, income tax is collected by HM Revenue & Customs (HMRC). Most people who work as employees never file anything — tax is taken straight from each payslip under the PAYE (“Pay As You Earn”) system, alongside National Insurance. This lesson explains the building blocks: how much you can earn tax-free, how the rate bands stack up, why Scotland is different, and what the tax year actually is. The aim is to help you read your own payslip with confidence — it is educational background, not tax advice.

Start with the personal allowance. As of 2026 the standard tax-free personal allowance is £12,570 a year. Income up to that amount is taxed at 0%.
Apply the rate bands to income above the allowance. In England, Wales and Northern Ireland the basic rate is 20% (on taxable income from £12,571 to £50,270), the higher rate is 40% (£50,271 to £125,140) and the additional rate is 45% (above £125,140).
Remember the high-income taper. Above £100,000 of income the personal allowance shrinks by £1 for every £2 earned, disappearing entirely at £125,140 — an effective squeeze around that band.
Add National Insurance on top. It is a separate deduction from income tax: as of 2026, employees pay 8% on earnings between roughly £1,048 and £4,189 a month, and 2% on earnings above that.

What matters

Income tax in the United Kingdom is built around two ideas: a tax-free slice of income, then progressive rate bands on the rest. The tax-free slice is the personal allowance — £12,570 a year as of 2026 — which most people receive automatically. Only income above it is taxed, and it is taxed in layers. For England, Wales and Northern Ireland the layers are straightforward. The basic rate of 20% applies to taxable income from £12,571 to £50,270. The higher rate of 40% applies from £50,271 to £125,140. The additional rate of 45% applies to anything above £125,140. Importantly, moving into a higher band does not re-tax your whole income — only the portion that falls inside each band is charged at that band’s rate. Scotland is the exception. Because income tax powers are partly devolved, the Scottish Parliament sets its own non-savings rates and bands. As of 2026 there are six of them, from a 19% starter rate up to a 48% top rate, which means higher earners in Scotland generally pay more than elsewhere in the UK. The £12,570 personal allowance, however, is the same UK-wide. Two further things shape your real deduction. First, the personal allowance is gradually withdrawn once income passes £100,000, vanishing at £125,140. Second, National Insurance contributions are taken alongside income tax but are a distinct charge with their own thresholds. Together with your tax code, these determine the net pay that lands in your account.

ExampleWorked example (England, as of 2026). Suppose Priya earns £35,000 a year. Her first £12,570 is covered by the personal allowance, so £0 tax on that. The remaining £22,430 falls in the basic-rate band and is taxed at 20%, which is about £4,486 of income tax for the year (figures rounded). Her higher-earning colleague on £60,000 would pay 20% on the slice up to £50,270 and 40% only on the part above it — not 40% on the whole salary. These are illustrative; check the official source when in doubt.

To see how regular saving could grow over time, try the Kontoo /compound-interest-calculator. For your exact tax code, bands and allowances, always check the official portal at gov.uk and your HMRC personal tax account when in doubt.

In depth

How PAYE and your tax code work

Most UK employees are taxed through PAYE, where the employer deducts income tax and National Insurance before paying you. Your tax code (for example 1257L, reflecting the £12,570 allowance) tells the payroll how much tax-free income to apply. If your circumstances change, the code can change too — you can review it in your HMRC personal tax account on gov.uk.

Why figures change each April

Allowances, thresholds and rates are confirmed for each tax year and can be frozen or adjusted in government Budgets. Because of this, any specific number — the £12,570 allowance, the £50,270 higher-rate threshold, or the National Insurance rates — should be treated as “correct as of 2026” and re-checked against gov.uk for the current year before you rely on it.

Checklist

The personal allowance is £12,570 a year as of 2026, and income up to it is taxed at 0%.
In England, Wales and Northern Ireland the rates are 20% basic, 40% higher and 45% additional.
Scotland sets its own bands, from 19% up to 48% as of 2026.
The tax year runs 6 April to 5 April, and National Insurance is a separate deduction from income tax.

Common myths

Myth: “Getting a raise into the higher band means I take home less.”

Reality: No. Only the portion of income inside each band is taxed at that band’s rate. A pay rise can never reduce your take-home pay simply by crossing a threshold — the extra is just taxed at the higher rate on that slice alone.

Myth: “Income tax and National Insurance are the same thing.”

Reality: They are separate. Income tax funds general government spending; National Insurance is a distinct contribution with its own thresholds (as of 2026, 8% then 2% for employees) and historically links to certain benefits and the State Pension.

Sources

Frequently asked questions

What is the UK tax year and why is it so oddly dated?

The UK tax year runs from 6 April to 5 April the following year — for example 6 April 2026 to 5 April 2027. The unusual dates are a historical quirk dating back to old calendar changes. Allowances and bands are set per tax year, so figures can change each April.

Is income tax different in Scotland?

Yes. Scotland sets its own income tax rates and bands for non-savings, non-dividend income. As of 2026 there are six bands — starter (19%), basic (20%), intermediate (21%), higher (42%), advanced (45%) and top (48%) — sitting above the same £12,570 personal allowance. The rest of the UK uses the simpler 20% / 40% / 45% structure.

Do I have to file a tax return?

Most employees do not — PAYE deducts tax automatically through the payroll. You may need to complete a Self Assessment return if you are self-employed, have higher untaxed income, or HMRC asks you to. Check gov.uk for the current Self Assessment rules.

All lessons · Glossary · Editorial · Kontoo does the math and explains – this is general education, not tax, legal or financial advice.

Your data stays with you. Full stop.

Kontoo collects, sees and stores none of your personal financial data – no account, no cloud, everything runs on your device. The free version is funded by ads (Google AdSense, only with your consent); with Kontoo Premium it is ad- and tracking-free.

No accountNo cloudData on-devicePremium: ad-free