The Personal Allowance comes first
Everyone starts with a Personal Allowance: the amount you can earn before any Income Tax is due. For 2026/27 it is £12,570 for most people, delivered through your tax code (usually 1257L). It is used against your income from the bottom up, so it covers your first £12,570 of earnings, and only the income above it is taxed.
The allowance is the same across the whole UK, including Scotland. It is not the same as being "tax-free up to that amount every year no matter what" — see the taper section below.
England, Wales and Northern Ireland bands (2026/27)
| Band | Taxable income | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic rate | £12,570 to £50,270 | 20% |
| Higher rate | £50,270 to £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
These thresholds are quoted as gross income (income before the Personal Allowance) in most HMRC material, which is why you will often see the basic rate described as ending at £50,270 rather than at £37,700 of taxable income. Both describe the same point.
Scottish Income Tax bands (2026/27)
If you live in Scotland, the Scottish Government sets the rates and thresholds for your earned income (salary, self-employment, pension, rental). Scotland has six bands instead of three, and the top rates are higher:
| Band | Rate |
|---|---|
| Starter rate | 19% |
| Basic rate | 20% |
| Intermediate rate | 21% |
| Higher rate | 42% |
| Advanced rate | 45% |
| Top rate | 48% |
National Insurance, the Personal Allowance, the taper, and the rates on dividends and savings interest are all reserved to the UK and are identical wherever you live. Only the tax on your earned income changes in Scotland.
The £100,000 taper and the 60% band
Once your adjusted net income goes over £100,000, your Personal Allowance is reduced by £1 for every £2 above that figure, so it disappears completely at £125,140. Because you are losing tax-free allowance and being taxed on more income at the same time, the effective rate on income in that £100,000 to £125,140 band is 60% (61% in Scotland). Pension contributions and Gift Aid reduce adjusted net income, which is why a bonus in that range is often paid straight into a pension.
Income Tax is charged band by band, not all at one rate
A common worry when a pay rise pushes you "into the higher rate" is that all your income will suddenly be taxed at the higher rate. It will not. Only the pound that crosses £125,140 of gross income is taxed at 40%; everything below still uses the lower bands. The salary increase calculator shows exactly how much of a raise you keep once the higher rate starts to bite.
Dividends and savings sit on top with their own rules
Dividends and savings interest are taxed after your earned income, using these same bands to decide which rate applies, but at their own rates and with their own allowances (the £500 Dividend Allowance and the Personal Savings Allowance). Dividend rates are UK-wide even in Scotland. See the dividend tax calculator for that side.
This is a general explainer. The take-home pay calculator applies the correct bands for your region and shows your Income Tax, National Insurance and net pay together.