UK Income Tax: Allowances and Bands (2026/27)

Income tax is a levy on earnings above a tax-free threshold, collected from employees via the Pay As You Earn (PAYE) system. For employed workers, the employer calculates the tax due on each payment, deducts it from gross pay, and pays it directly to HMRC on the employee's behalf. The employee receives net pay and never handles the tax amount directly.

This automatic collection system means most employees in straightforward employment situations do not need to file a self-assessment tax return. PAYE handles their income tax and National Insurance entirely through payroll. Problems typically only arise when circumstances change — a new job, multiple employments, a large bonus, or an incorrect tax code.

Income tax is distinct from National Insurance, which funds specific benefits including the State Pension. Both are deducted from the payslip and both reduce take-home pay, but they are calculated separately using different thresholds and rates.

• Tax is calculated and deducted by the employer each pay period.
• HMRC receives the tax directly from the employer, not the employee.
• Most employees do not need a self-assessment return if PAYE is correct.
• Income tax and National Insurance are separate deductions with different rules.

The standard Personal Allowance is £12,570 in 2026/27. The published policy keeps it at that level through 2030/31. Your own entitlement can differ.

A threshold freeze creates fiscal drag when nominal wages rise: more income becomes taxable, even where the pay rise only keeps pace with prices. Unchanged nominal pay and unchanged tax rules do not themselves increase the cash tax bill.

The allowance falls by £1 for every £2 of adjusted net income above £100,000 and reaches zero at £125,140. Pension relief and Gift Aid can affect adjusted net income. The taper's effective rate differs between Scotland and the rest of the UK.

This table describes 2026/27 employment income in England, Wales and Northern Ireland, with the standard allowance and no other adjustments. Scotland uses different bands. Tax is charged only on the income falling within each band, not on total income at that rate. This means crossing into a higher band does not make all income taxable at the higher rate — only the income above the band threshold is affected.

For example, an employee earning £60,000 pays: 0% on the first £12,570; 20% on £12,571–£50,270 (£37,700 × 20% = £7,540); and 40% on £50,271–£60,000 (£9,730 × 40% = £3,892). Total tax: £11,432. The total income is not taxed at 40% — only the slice above £50,270 is.

The marginal rate is the rate of tax paid on the next £1 of income. The effective rate is the total tax paid as a percentage of total income. These two figures are often confused, but understanding the difference helps explain why crossing an Income Tax band does not tax your whole salary at the higher rate.

On a total income of £40,000, the income tax is approximately £5,486 in England in 2026–27. The effective rate is £5,486 ÷ £40,000 = 13.7%. But the marginal rate on that £40,000 income is 20% — any additional £1 earned above £40,000 up to £50,270 will be taxed at 20p.

If income crosses into the higher-rate band at £50,271, the marginal rate becomes 40%. But the effective rate only rises gradually because the 40% applies only to the portion above £50,270. At £60,000, the effective rate rises to around 19%, not 40%.

• Marginal rate: rate on the next £1 of income.
• Effective rate: total tax as a percentage of total income — often lower than the marginal rate in a straightforward salary example.
• Income Tax band crossing alone does not reverse a pay rise. Household benefits, childcare eligibility and other deductions need a separate check.
• The marginal rate matters most when calculating the saving from salary sacrifice or pension contributions.

Cumulative PAYE does not simply multiply each month's pay by an assumed monthly rate. Instead, it uses a cumulative calculation that compares total year-to-date earnings with total year-to-date tax-free allowance to calculate total tax due so far, then deducts what has already been paid in earlier periods. The difference is this period's tax deduction.

This cumulative approach means PAYE automatically corrects for irregular pay. If an employee receives a large bonus in one month, the tax in that month will be higher, but in a subsequent month with lower pay the tax may be lower than usual as the system catches up. That reconciliation depends on a correct code and complete pay and tax records. Other income and adjustments may still require HMRC reconciliation.

The cumulative calculation is based on the tax code in use. The most common code, 1257L, means the employee has a £12,570 annual tax-free allowance, allocated pro-rata each month (£1,047.50 per month). In month six of the tax year (September), the cumulative allowance used is £6,285 (6 × £1,047.50).

• Cumulative PAYE looks at year-to-date figures; W1, M1 and X operate non-cumulatively.
• Irregular pay (bonuses, arrears) is automatically smoothed over the year.
• Tax code determines the annual allowance allocated each pay period.
• 1257L: £12,570 annual allowance = £1,047.50 per month allocated cumulatively.

Scotland has had devolved income tax powers since 2016 and has used them to introduce additional bands and rates that differ from England, Wales, and Northern Ireland. Scottish taxpayers pay Scottish income tax on employment income, pensions, and most other non-savings income, but still pay UK rates on savings interest and dividends.

Scottish taxpayers are identified by an S prefix in their tax code (e.g. S1257L). Employers use the S code to apply Scottish rates through PAYE automatically. Figures are approximate and do not include the personal allowance taper above £100,000.

Above £100,000 adjusted net income, every extra £1 withdraws 50p of Personal Allowance until none remains at £125,140.

For employment income in England, Wales and Northern Ireland within this range, 40p direct tax plus 20p from the lost allowance gives a 60% effective marginal Income Tax rate. For Scottish employment income in the advanced band, 45p plus 22.5p gives 67.5%. Neither is a statutory tax band, and these figures exclude NI and loan deductions.

Eligible pension contributions or Gift Aid can reduce adjusted net income and restore allowance. Relief depends on the amount, income type and applicable limits. Use the tax-threshold explorer for the salary-only effect and check household support separately.

Eligible married couples and civil partners can transfer £1,260 of Personal Allowance in 2026/27, reducing the recipient's tax by up to £252. The person transferring usually has income below their allowance; check both partners' positions because transferring can increase the giver's tax.

The recipient must not pay higher-rate tax. In Scotland the starter, basic and intermediate rates can qualify. See HMRC's eligibility guidance for the full conditions.

N is the suffix for the person transferring allowance, commonly 1131N. M is for the recipient, commonly 1383M. These are suffixes, not prefixes; other adjustments can change the numbers.

Blind Person's Allowance is £3,250 in 2026/27. Added to a full £12,570 Personal Allowance, it gives £15,820 before other adjustments.

In England and Wales, eligibility normally depends on being registered blind or severely sight impaired with the local council. In Scotland and Northern Ireland, the test is that you cannot do work for which eyesight is essential. Equivalent council registration is not a UK-wide requirement.

Read the eligibility rules and HMRC's claim instructions. Unused allowance may be transferable to a spouse or civil partner under the scheme rules.