Beginner’s Guide to UK Tax Bands and Allowances
Understanding how income tax works in the UK is important for anyone earning money, whether you are employed, self-employed, or running a business. This guide breaks down the tax bands and allowances for the 2025/26 tax year in simple terms.
What Is Income Tax?
Income tax is a tax you pay on your earnings. This includes wages from employment, profits from self-employment, pensions, rental income, and more. HMRC collects this tax to fund public services like the NHS, education, and infrastructure.
Your Personal Allowance
The Personal Allowance is the amount you can earn each year before you start paying income tax. For most people in 2025/26, this is:
- £12,570 - the standard tax-free Personal Allowance.
- If you earn over £100,000, this allowance is reduced by £1 for every £2 over that amount. Your allowance reaches £0 at £125,140. The result is a very high effective tax rate in this range.
UK Income Tax Bands (2025/26)
Once you exceed your Personal Allowance, the rest of your income is taxed in the following bands in England, Wales, and Northern Ireland:
| Band | Taxable 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% |
Only the portion of your income that falls within each band is taxed at that rate, not your whole salary.
Examples
Example 1: Earning £30,000
- First £12,570 - tax free (Personal Allowance)
- Next £17,430 - taxed at 20% = £3,486
- Total Income Tax: £3,486
Example 2: Earning £70,000
- First £12,570 - tax free
- £12,571 to £50,270 (that is £37,700) - taxed at 20% = £7,540.00
- £50,271 to £70,000 (that is £19,729) - taxed at 40% = £7,891.60
- Total Income Tax: £15,431.60
Other Allowances
You may also be entitled to additional tax-free allowances and reliefs:
- Marriage Allowance - you can transfer up to £1,260 of your Personal Allowance to your spouse or civil partner if you earn less than £12,570 and they are a basic rate taxpayer. This reduces their tax by up to £252.
- Personal Savings Allowance - up to £1,000 of interest is tax free for basic rate taxpayers (£500 for higher rate). Additional rate taxpayers do not get this allowance. A separate starting rate for savings can apply if your other income is low.
- Dividend Allowance - the first £500 of dividend income is tax free in 2025/26.
Check Your Tax Code
Your tax code tells your employer how much tax to deduct from your pay. It is usually based on your Personal Allowance (for example, code 1257L). Make sure your tax code is correct to avoid overpaying or underpaying.
Use a Tax Calculator
Want to see how much tax you will pay based on your exact income? Try our Take-Home Pay Calculator to get a full breakdown after tax, National Insurance, and student loans.
Quick FAQs
Do National Insurance and Income Tax use the same bands?
No. National Insurance has different thresholds and rates. Check your take-home using the calculator above.
When do I lose my Personal Allowance?
It tapers away after £100,000 of income. It is fully removed by £125,140.
Do Scottish rates affect the Personal Savings Allowance?
No. The Personal Savings Allowance uses the UK bands for this purpose, even if you pay Scottish Income Tax.