How Income Tax works in 2026/27
Income Tax is charged on your earnings from employment, self-employment, pensions, rental profit, and most other income. For the 2026/27 tax year (6 April 2026 to 5 April 2027), you can earn up to £12,570 before paying any Income Tax — this is your Personal Allowance. Above that, England, Wales and Northern Ireland use three rates. The Personal Allowance and thresholds are frozen until April 2031, so as wages rise more income is dragged into higher bands — an effect known as fiscal drag.
| Band | Taxable income (2026/27) | Rate |
|---|
| Personal Allowance | £0 – £12,570 | 0% |
| Basic rate | £12,571 – £50,270 | 20% |
| Higher rate | £50,271 – £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
Scotland sets its own rates on earned income — see our Scottish Income Tax guide. Savings and dividend income use UK rates everywhere.
Worked example
Salary of £55,000 (England, code 1257L)
Personal Allowance (0%)£12,570 → £0
Basic rate: £37,700 × 20%£7,540
Higher rate: £4,730 × 40%£1,892
Income Tax for the year£9,432
National Insurance is charged separately on top — see our National Insurance guide. To model any salary precisely, use the Salary & Take-Home calculator.
PAYE and your tax code
Most employees pay through PAYE (Pay As You Earn): your employer deducts Income Tax and National Insurance each payday using the tax code HMRC issues. The standard 2026/27 code is 1257L, reflecting the full £12,570 allowance. Your code can change if you have benefits-in-kind (a company car, medical insurance), underpaid tax from an earlier year, more than one job, or untaxed income HMRC is collecting through your salary.
🔑 Check your tax code
Find your code on your payslip, P60 or P45. Check it any time in your Personal Tax Account. If it looks wrong you can update it online or call HMRC — the wrong code means you over- or under-pay all year. Our Tax Code calculator decodes what yours means.
Key PAYE forms
- P60 — your end-of-year summary of pay and tax, given by 31 May.
- P45 — issued when you leave a job; give it to your next employer.
- P11D — reports taxable benefits-in-kind your employer provides.
- Starter checklist — replaces the old P46 when you start a job without a P45.
The £100,000 taper — the 60% trap
Once your income passes £100,000, your Personal Allowance is cut by £1 for every £2 you earn above it, disappearing entirely at £125,140. Because you pay 40% tax and lose allowance worth another 20%, the effective marginal rate on income between £100,000 and £125,140 is 60%.
Worked example
Earning £110,000 — the cost of the taper
Income over £100,000£10,000
Personal Allowance lost (£10,000 ÷ 2)£5,000
Extra tax on that £10,000 (40%)£4,000
Tax on lost allowance (£5,000 × 40%)£2,000
Effective rate on that £10,00060%
A pension contribution reduces your adjusted net income, so paying £10,000 gross into a pension here can restore the full allowance and effectively cost you only £4,000 net. This is one of the most valuable planning moves for higher earners.
Self Assessment — who files and when
You must file a Self Assessment tax return (form SA100) if any of the following apply:
- You are self-employed and earned over £1,000 (gross) — use the SA103 self-employment pages.
- You earned over £100,000.
- You have untaxed income over £2,500 (e.g. tips, commission, savings, dividends).
- You have rental income — use the SA105 property pages.
- You are a company director with untaxed income, or have foreign income (SA106), or capital gains (SA108).
- You or your partner earned over £60,000 and claimed Child Benefit (the High Income Child Benefit Charge).
⏱️ Key Self Assessment dates for 2026/27
- 5 October 2027 — register for Self Assessment if newly required.
- 31 October 2027 — deadline for paper returns.
- 31 January 2028 — online filing deadline and the date your tax (plus any first payment on account) is due.
- 31 July 2028 — second payment on account, if applicable.
File online through the HMRC Self Assessment portal. Late filing triggers an automatic £100 penalty, rising after three, six and twelve months. Our Self Assessment calculator estimates what you'll owe.
🧾 Making Tax Digital — coming for many filers
From April 2026, sole traders and landlords with qualifying income over £50,000 must keep digital records and send quarterly updates through MTD-compatible software. From April 2027 this extends to those over £30,000. See our Making Tax Digital hub.
Reliefs that cut your Income Tax bill
- Marriage Allowance — a non-taxpaying spouse can transfer £1,260 of allowance to a basic-rate partner, saving up to £252 a year. Backdate up to four years. Apply in your Personal Tax Account.
- Pension contributions — relief at your highest rate; higher/additional-rate taxpayers claim the extra through box 1 of the "tax reliefs" section (SA100 TR4).
- Gift Aid donations — basic-rate relief is automatic; higher-rate relief is claimed on the return (SA100 TR4) and extends your basic-rate band.
- Employment expenses — professional subscriptions, tools, mileage and working-from-home costs (form P87 or the SA102 employment pages).
For the full list of allowable employee expenses, see GOV.UK: tax relief for employees.
