UK Tax Calculator

UK income tax is calculated on a tiered system. You get a personal allowance (currently £12,570) that is completely tax-free. Everything above that is taxed in bands: 20% basic rate up to £50,270 total income, 40% higher rate up to £125,140, and 45% additional rate above that.

If you live in Scotland, you pay Scottish income tax rates instead, which have six bands ranging from 19% to 48%. Your tax code (shown on your payslip) tells your employer how much tax-free pay to give you before deducting tax.

Once your income exceeds £100,000, your personal allowance is gradually withdrawn. For every £2 you earn above £100,000, you lose £1 of your £12,570 allowance. This creates a hidden 60% tax rate on income between £100,000 and £125,140.

For example, if you earn £110,000, you lose £5,000 of your personal allowance. That £10,000 of extra income costs you £4,000 in income tax (40%) plus £2,000 from the lost allowance, giving an effective rate of 60%. This is one of the most commonly missed tax planning issues in the UK. Salary sacrifice into a pension is one of the most effective ways to bring your income back below £100,000 and reclaim the full allowance.

Employees pay National Insurance at 8% on earnings between £12,570 and £50,270, then 2% on anything above that. NI is separate from income tax but is deducted from your pay in the same way. You stop paying NI when you reach State Pension age (currently 66).

From April 2025, employer NI increased to 15% with a lower threshold of £5,000. This does not directly reduce your pay, but it does affect your employer's costs and may influence future pay decisions.