Income Tax and National Insurance explained (2026/27)

Income Tax: the allowance and the bands

Income Tax is charged on the income above your Personal Allowance, which is £12,570 for most people (the tax code 1257L). Everywhere in the UK except Scotland, the rest is taxed in three bands:

• Up to £12,570: 0%.
• £12,571 to £50,270: 20%, the basic rate.
• £50,271 to £125,140: 40%, the higher rate.
• Over £125,140: 45%, the additional rate.

National Insurance: the second deduction

Most employees pay Class 1 National Insurance, category letter A. You pay nothing on the first £12,570 a year (£1,048 a month), 8% on pay up to £50,270 (£4,189 a month) and 2% above. Your employer pays its own National Insurance on top, which is not taken from your pay.

On £30,000 you pay £3,486 Income Tax and £1,394.40 National Insurance, and keep £25,119.60: £2,093.30 a month. On £60,000 you pay £11,432 and £3,210.60 and keep £45,357.40, or £3,779.78 a month. Each extra £100 leaves £72 in the first case and £58 in the second.

Above £100,000: the 62% band

The Personal Allowance falls by £1 for every £2 of adjusted net income above £100,000 and is zero from £125,140. Each extra £100 in that range pays £40 of tax, then another £20 on the £50 of allowance you lose, plus £2 of National Insurance. You keep £38.

At £110,000 the allowance is £7,570 and you keep £72,357.40, only £3,800 more than at £100,000. Gift Aid donations and pension contributions are taken off adjusted net income, so they can bring you back under the line (GOV.UK).

Pensions and student loans

• Workplace pension through your payslip (“net pay”): the contribution comes out before Income Tax, but not before National Insurance. On £60,000, a 5% contribution of £3,000 cuts your take-home by £1,800.
• Salary sacrifice: you give up part of your pay, so tax and National Insurance are both worked out on the lower amount. On £60,000, a 10% contribution of £6,000 costs £3,480 of take-home, against £3,600 through net pay.
• Relief at source (most personal pensions): you pay from taxed income and the provider adds 20%. Higher-rate payers claim the rest through Self Assessment (GOV.UK).
• Student loan: 9% of pay above the threshold of your plan (Plan 1 £26,900, Plan 2 £29,385, Plan 4 £33,795, Plan 5 £25,000). A postgraduate loan takes 6% above £21,000. On £40,000 with Plan 2 that is £955.35 a year.

Scotland

Scottish taxpayers pay Income Tax to the Scottish Government on six bands: 19% from £12,571, 20% from £16,538, 21% from £29,527, 42% from £43,663, 45% from £75,001 and 48% over £125,140. National Insurance is the same everywhere. On £40,000, the tax is £5,551.07 in Scotland against £5,486 in England: £65.07 more.

Common mistakes

• Believing a pay rise can leave you with less. Only the part above a threshold pays the higher rate.
• Forgetting National Insurance when you work out what a pay rise is worth.
• Comparing a gross offer with a net one. Ask which one the figure is.
• Not checking your tax code when you change jobs. 1257L is the code for most people with one job (GOV.UK).
• Using old thresholds. These are the 2026/27 figures, and they can change every April.