The UK income tax system uses a progressive structure where different rates apply to different portions of your income. For 2025/26:

• Personal Allowance: £12,570 tax-free
• Basic Rate (20%): £12,571 to £50,270
• Higher Rate (40%): £50,271 to £125,140
• Additional Rate (45%): Over £125,140

If your income exceeds £100,000, your personal allowance is reduced by £1 for every £2 earned above that threshold. This creates an effective 60% marginal rate between £100,000 and £125,140.

Scotland has different rates

Scottish residents pay six rates: Starter (19%), Basic (20%), Intermediate (21%), Higher (42%), Advanced (45%), and Top (48%). Use the Scotland toggle in our take-home calculator to see the difference.

Reducing your tax bill

Salary sacrifice pension contributions lower your taxable income. For higher-rate taxpayers, this represents significant savings. Try different contribution rates in the calculator to see the impact.

A breakdown of how UK student loan repayments work in 2025/26:

Plan 1 (pre-2012 courses)

Repay 9% of income above £24,990/year. Written off at age 65.

Plan 2 (post-2012, England & Wales)

Repay 9% of income above £27,295. Written off 30 years after first due to repay.

Plan 4 (Scotland)

Repay 9% above £31,395. The higher threshold means lower monthly repayments.

Plan 5 (post-2023, England)

Repay 9% above £25,000. Written off after 40 years — the longest period.

Postgraduate loans

Repaid at 6% above £21,000, independently of any undergraduate loan. You can be making repayments on two loans simultaneously.

Use our student loan tracker to project how long your loan will take to repay.

National Insurance funds the State Pension and other benefits. For employees in 2025/26:

• Primary Threshold: £12,570/year — no NI below this
• Main Rate: 8% on £12,570 to £50,270
• Upper Rate: 2% above £50,270

The 8% rate was introduced in April 2024 after being cut from 12% in two stages — the biggest NI cut in decades, saving the average worker over £900/year.

Over state pension age?

You no longer pay employee NI, even if still working. Use the "No NI" checkbox in the calculator to model this.

Auto-enrolment

Minimum contribution is 5% of qualifying earnings (£6,240 to £50,270). Your employer adds at least 3%.

Salary sacrifice

You agree to a lower salary in exchange for higher employer pension contributions. You save both income tax and NI on the sacrificed amount. For a 40% taxpayer, that's up to 42% saved on every pound contributed.

Personal pensions (SIPPs)

You get tax relief at your marginal rate. Basic rate relief (20%) is added automatically by your provider. Higher and additional rate taxpayers claim extra through their tax return.

On a £200,000 mortgage over 25 years:

• At 4.0%: £1,056/month — £116,702 total interest
• At 4.5%: £1,112/month — £133,536 total interest
• At 5.0%: £1,170/month — £150,932 total interest

That's over £34,000 difference between 4% and 5%. Use our mortgage calculator to compare rates.

If you earn £50,000 and get a £5,000 raise, that extra falls entirely in the 40% band. Combined with 2% NI, you keep only £2,900. That's a 42% marginal rate.

The £100k cliff

Between £100,000 and £125,140, the effective marginal rate is 60%. A raise from £100k to £105k gives only £2,000 extra take-home.

Alternatives to a higher salary

• Pension contributions: Salary sacrifice to stay below £100k
• Company car or EV scheme: Tax-efficient benefit in kind
• Flexible working: Reduced hours at same hourly rate

Use our salary comparison tool to see the real difference.