What are the UK income tax rates and bands for 2026/27?

UK income tax rates for 2026/27 in England, Wales and Northern Ireland are: 0% on the first £12,570 (Personal Allowance); 20% Basic Rate on income from £12,571 to £50,270; 40% Higher Rate on income from £50,271 to £125,140; 45% Additional Rate on income above £125,140. All thresholds remain frozen until April 2031. The majority of UK workers pay only Basic Rate tax. Scotland has separate rates ranging from 19% to 48%.

How much National Insurance do I pay in 2026/27?

As an employee in 2026/27, you pay Class 1 National Insurance at 8% on earnings between £12,570 and £50,270, and 2% on earnings above £50,270. There is no NI on the first £12,570. On a £35,000 salary, annual NI is approximately £1,794. Your employer also pays Class 1 NI at 15% on your earnings above the £5,000 secondary threshold — this does not reduce your pay but increases the total cost of employing you. Self-employed people pay Class 4 NI at 6% on profits between £12,570 and £50,270, and 2% above.

What is the 60% tax trap in the UK?

The 60% tax trap occurs when your income is between £100,000 and £125,140. In this range, you lose £1 of your personal allowance for every £2 of income above £100,000. This creates an effective marginal tax rate of 60% — you pay 40% higher rate tax on the extra income, plus lose another 20% worth of previously tax-free allowance. Over 2 million UK taxpayers are now in this band. The most effective way to escape the trap is to make pension contributions to bring your adjusted net income below £100,000.

What is Payment on Account and how does it work?

Payment on Account is HMRC's system for collecting tax in advance from self-employed people. If your Self Assessment tax bill exceeds £1,000, HMRC requires you to make two advance payments towards next year's bill — each worth 50% of your current year's bill. The first payment is due 31 January (alongside your current year's tax), and the second is due 31 July. For example, if your 2026/27 tax bill is £4,000, your January payment will be £4,000 (current year) plus £2,000 (first POA) = £6,000 total. Many first-year self-employed people are caught off guard by this.

How much tax does a self-employed person pay in 2026/27?

A self-employed person (sole trader) in 2026/27 pays Income Tax and Class 4 National Insurance on their profits. Income tax is calculated using the same bands as employment: 0% up to £12,570 (Personal Allowance), 20% on £12,571–£50,270, 40% on £50,271–£125,140, 45% above. Class 4 NI is 6% on profits between £12,570 and £50,270, and 2% above. Class 2 NI is no longer compulsory from April 2024 (voluntary at £3.50/week). On £40,000 profit: Income Tax = £5,486, Class 4 NI = £1,645.80, total £7,131.80, net profit £32,868.

How does fiscal drag affect my tax bill even without a pay rise?

Fiscal drag happens because tax thresholds are frozen while wages continue to rise with inflation. The UK personal allowance has been frozen at £12,570 since 2021/22 and will remain frozen until April 2031. As wages grow by 3–5% per year, more of your income falls into taxable bands — even if you haven't received a meaningful pay rise in real terms. The OBR estimates this freeze will drag an additional 3.2 million people into paying income tax by 2031. On a practical level, if your salary rose from £45,000 to £50,000 between 2022 and 2026, your tax bill increased by far more than just the 20% basic rate on the extra £5,000, because the frozen thresholds mean no compensating rise in your tax-free amount.

Home →Countries →United Kingdom

UK Tax Calculator 2026/27

Q: What are the UK VAT rates in 2026?

UK VAT rates in 2026 are: 20% standard rate (applies to most goods and services, including electronics, clothing, professional services and consultancy); 5% reduced rate (domestic energy and gas, children's car seats, energy-saving materials, nicotine patches); 0% zero rate (most food, children's clothing, books, newspapers, most medicines). The VAT registration threshold is £90,000 in taxable turnover in any rolling 12-month period. Once registered, you must charge VAT on your sales and file quarterly VAT returns via HMRC's Making Tax Digital system.

Calculate your take-home pay, self-employed tax and VAT — using HMRC-confirmed 2026/27 rates.

Change country:

Salary Calculator

Annual gross salary (£)

Tax region

Note: Scotland uses different bands. This calculator uses England/Wales/NI rates.

Pension contribution (%)

Salary sacrifice pension reduces gross before tax and NI are calculated

Student loan

Tax code assumed: 1257L (standard). Personal Allowance: £12,570. Thresholds frozen until April 2031.

UK Tax System 2026/27 — How It Works

The UK tax system for 2026/27 is built around three main deductions from your earnings: Income Tax (charged at 20%, 40%, or 45% depending on your income), National Insurance (8% on most of your working income), and for self-employed people, Class 4 NI (6% on profits). Every UK resident also receives a Personal Allowance of £12,570 — the amount you can earn completely tax-free each year. All income tax thresholds are frozen until April 2031 under HMRC's confirmed plan, which means fiscal drag quietly increases everyone's tax bill each year even without a formal rate change.

The UK tax year runs from 6 April to 5 April the following year — so the 2026/27 tax year runs from 6 April 2026 to 5 April 2027. For employees, tax is collected automatically through PAYE (Pay As You Earn) — your employer deducts income tax and National Insurance before you receive your pay. Self-employed people pay through Self Assessment, filing an annual tax return and paying their bill by 31 January.

💼

Income Tax

20% Basic / 40% Higher / 45% Additional. Personal Allowance £12,570 tax-free.

🛡️

National Insurance

Employee: 8% on £12,570–£50,270, then 2%. Self-employed: 6% Class 4.

🧮

VAT

20% standard / 5% reduced / 0% zero rate. Register above £90,000 turnover.

📅

Tax Year

6 April 2026 to 5 April 2027. PAYE for employees, Self Assessment for self-employed.

💡 2026/27 Key Facts at a Glance: Personal Allowance: £12,570. Basic Rate threshold: £50,270. Higher Rate threshold: £125,140. Employee NI Primary Threshold: £12,570. Upper Earnings Limit: £50,270. Employer NI Secondary Threshold: £5,000. VAT registration: £90,000. All thresholds frozen until April 2031. Source: HMRC, GOV.UK, House of Commons Library 2026.

UK Take-Home Pay 2026/27 — How Your Salary Is Calculated

Your take-home pay is your gross salary minus three deductions: income tax, National Insurance, and any pension or student loan repayments. The calculation follows a fixed order, and understanding each step explains exactly why your payslip shows the numbers it does. Tax code 1257L (the most common UK code) means your employer gives you the standard £12,570 personal allowance and deducts tax on everything above it using the progressive bands below.

Personal Allowance — £12,570 tax-free

The first £12,570 of your salary is completely tax-free. This is called the Personal Allowance. It has been frozen at this level since 2021/22 and will remain at £12,570 until at least April 2031. If your income exceeds £100,000, the allowance tapers by £1 for every £2 above that threshold, disappearing entirely at £125,140. For most workers, the full allowance applies.

Example: £35,000 gross — £12,570 allowance = £22,430 taxable income

Income Tax — 20% on most, 40% above £50,270

Income tax is charged on your taxable income (gross minus personal allowance) using progressive bands. The Basic Rate of 20% applies on taxable income up to £37,700 (i.e. gross salary up to £50,270). The Higher Rate of 40% applies on taxable income between £37,701 and £112,570 (gross £50,271–£125,140). The Additional Rate of 45% applies on taxable income above £112,570. Critically, only the income in each band is taxed at that rate — reaching 40% does not mean your entire salary is taxed at 40%.

Example: £35,000 gross → taxable £22,430 → all at 20% → Income Tax: £4,486

National Insurance — 8% on most earnings

Employee Class 1 National Insurance is charged separately from income tax. In 2026/27, you pay 8% on earnings between £12,570 (the Primary Threshold) and £50,270 (the Upper Earnings Limit), and just 2% on earnings above £50,270. There is no NI on the first £12,570. NI funds the State Pension, NHS, and certain benefits. You need 35 qualifying years to receive the full State Pension (worth £230.25/week in 2026/27). NI is not charged on pension income, savings interest or dividends.

Example: £35,000 gross → NI on £22,430 at 8% = £1,794.40

Pension & Student Loan (if applicable)

Salary sacrifice pension contributions reduce your gross pay before tax and NI are calculated — making them especially tax-efficient. A 5% pension contribution on a £35,000 salary saves you both income tax (20%) and NI (8%) on the contributed amount. Student loan repayments are calculated separately: Plan 2 takes 9% of earnings above £29,385. These deductions sit below income tax and NI on your payslip and do not affect your tax band.

Example: 5% pension on £35,000 = £1,750 contribution, saves ~£490 in tax and NI combined

📊 UK take-home pay table 2026/27 (England/Wales/NI, standard code 1257L)

Gross Salary	Income Tax	Nat. Insurance	Monthly Net	Annual Net
£20,000	−£1,486	−£598.40	£1,493	£17,915.60
£25,000	−£2,486	−£998.40	£1,793	£21,515.60
£30,000	−£3,486	−£1,394.40	£2,093	£25,119.60
£35,000	−£4,486	−£1,794.40	£2,393	£28,719.60
£40,000	−£5,486	−£2,194.40	£2,693	£32,319.60
£50,000	−£7,486	−£2,994.40	£3,293	£39,519.60
£60,000	−£11,432	−£3,210.60	£3,779	£45,357.40
£75,000	−£17,432	−£3,510.60	£4,505	£54,057.40
£100,000	−£27,432	−£4,010.60	£5,713	£68,557.40

* Standard tax code 1257L, England/Wales/NI, 2026/27 HMRC rates. Pension and student loan excluded. Source: HMRC 2026/27.

UK Income Tax Bands 2026/27 — Full Table

UK income tax uses a progressive band system: you pay the stated rate only on the income within each band, not on your entire salary. The bands for England, Wales and Northern Ireland are unchanged from 2025/26 — all thresholds are frozen until 2031 under confirmed HMRC plans. Scotland uses separate, different rates set by the Scottish Government (six bands ranging from 19% to 48%).

Personal Allowance: £0 – £12,570Completely tax-free. Every UK taxpayer gets this.

20%

Basic Rate: £12,571 – £50,270The most common band. Majority of UK workers pay only this.

40%

Higher Rate: £50,271 – £125,140Reached by earners above £50,270. Thresholds frozen since 2021.

45%

Additional Rate: Above £125,140Top earners only. Personal Allowance fully withdrawn by this point.

⚠️ The 60% Tax Trap — £100,000 to £125,140

Between £100,000 and £125,140, you face an effective marginal tax rate of 60%. This is not a formal band — it is caused by the personal allowance taper. For every £2 you earn above £100,000, you lose £1 of your personal allowance. That lost allowance is now taxable at 40%, creating a combined effective rate of 60% on every extra pound in this range. Including NI (2% above £50,270), the real effective rate is 62%.

Example: You earn £105,000 and receive a £1,000 pay rise

→ Tax on extra £1,000 at 40% Higher Rate: £400

→ You lose £500 of personal allowance (£1 per £2). That £500 is now taxable at 40%: £200 extra tax

→ NI at 2%: £20

→ Total taken: £620 out of your £1,000 rise. You keep just £380.

How to escape: Make pension contributions (salary sacrifice or personal pension) to bring your adjusted net income below £100,000. A contribution of just £5,000 into a pension when you earn £105,000 can save you up to £3,100 in tax — a 62% return on that pension contribution.

📉 Fiscal Drag — Why Your Tax Bill Rises Without a Rate Change

Fiscal drag is the phenomenon where frozen tax thresholds combined with rising wages pull more income into higher tax bands. The UK personal allowance has been frozen at £12,570 since 2021/22. With wages rising by approximately 4–5% per year, an increasing share of every pay rise is taxed at 20% or above. The OBR estimates the threshold freeze will bring an extra 3.2 million people into paying income tax by 2031. In practical terms: if your salary rose from £45,000 in 2022 to £53,000 in 2026, part of that rise crossed the £50,270 threshold into the 40% Higher Rate band — even if inflation wiped out the real-terms gain.

Self-Employed Tax UK 2026/27 — Sole Trader Guide

As a sole trader or freelancer in the UK, you pay income tax and Class 4 National Insurance on your profits — not your turnover. Profit is your income minus all allowable business expenses. You pay through Self Assessment: register with HMRC, file an annual tax return by 31 January, and pay your bill at the same time. The key difference from employment is that no tax is deducted at source — which means you must budget carefully throughout the year or face a large January bill.

💼 Self-Employed Tax Rates 2026/27

Income Tax — same bands as employees

On profits after Personal Allowance (£12,570)

0/20/40/45%

Class 4 NI — main band

On profits £12,570–£50,270

Class 4 NI — above upper limit

On profits above £50,270

Class 2 NI — voluntary only

Abolished as compulsory from April 2024. Pay to protect State Pension.

£3.50/week

📊 Example: £40,000 sole trader profit

Gross profit£40,000

Personal Allowance−£12,570

Taxable income£27,430

Income Tax (20%)−£5,486

Class 4 NI (6% on £27,430)−£1,645.80

Total tax£7,131.80

Net profit (take-home)£32,868.20

📅 Payment on Account — Why Your January Bill Is Bigger Than You Expect

Every January, thousands of newly self-employed people open their HMRC bill and ask the same question: "Why do I owe more than my tax bill?" The answer is Payment on Account. If your Self Assessment tax bill exceeds £1,000, HMRC requires you to pay 50% in advance towards next year's bill at the same time as this year's tax. A second advance payment of 50% is due the following July.

Example: First year as self-employed, tax bill = £4,000

31 Jan 2027

Current year tax

£4,000

31 Jan 2027

1st Payment on Account (50%)

+£2,000

31 Jul 2027

2nd Payment on Account (50%)

£2,000

January total: £6,000 (£4,000 current year + £2,000 advance). Many people only save for £4,000 and are caught short.

How to prepare: Set aside 25–30% of every invoice payment into a separate savings account. This covers income tax, Class 4 NI, and the Payment on Account buffer. If your income drops in the following year, you can apply to reduce your Payments on Account via your Self Assessment return or HMRC's online portal.

📊 Sole trader net profit table 2026/27

Annual Profit	Income Tax	Class 4 NI	Monthly Net	Annual Net
£20,000	−£1,486	−£447	£1,506	£18,067
£30,000	−£3,486	−£1,047	£2,122	£25,467
£40,000	−£5,486	−£1,645.80	£2,739	£32,868
£50,000	−£7,486	−£2,245.80	£3,356	£40,268
£60,000	−£11,432	−£2,445.80	£3,843	£46,122
£80,000	−£19,432	−£2,845.80	£4,810	£57,722

* No expenses, no pension. Set aside an additional 12–15% for Payment on Account. Source: HMRC 2026/27.

UK VAT Rates 2026 — 20%, 5% and 0% Explained

VAT (Value Added Tax) is a consumption tax added to the price of most goods and services sold in the UK. The standard UK VAT rate in 2026 is 20%. There is also a reduced rate of 5% for specific essential items, and a zero rate (0%) for necessities including most food and children's clothing. You must register for VAT once your taxable turnover exceeds £90,000 in any rolling 12-month period.

20%

Standard Rate

•Electronics, laptops, phones
•Clothing and footwear (adult)
•Professional services, consulting
•Software and digital services
•Furniture, appliances, cars
•Alcohol, tobacco, cosmetics
•Most B2B services
•All items not in 5% or 0% list

Reduced Rate

•Domestic gas and electricity
•Children's car seats
•Energy-saving materials installed in homes
•Nicotine patches and gum
•Mobility aids for elderly
•Period products
•Some welfare services
•Certain renovation services

Zero Rate

•Most food (not restaurant meals)
•Children's clothing and footwear
•Books, newspapers, magazines
•Most prescription medicines
•Exports outside the UK
•Public transport fares
•Equipment for disabled people
•New residential buildings

📐 VAT Calculation Formulas 2026

Add VAT (20%) — net to gross:

Gross = Net × 1.20

Example: £1,000 × 1.20 = £1,200

Remove VAT (20%) — gross to net:

Net = Gross ÷ 1.20

Example: £1,200 ÷ 1.20 = £1,000

💡 Quick shortcut: To find the VAT amount in any 20% gross price, divide by 6. Example: £1,200 ÷ 6 = £200 VAT. This works because VAT at 20% is always one-sixth of the gross price.

UK Tax Calendar 2026/27 — Key Deadlines

📋

Self Assessment Filing Deadline

31 January 2027

File your 2025/26 Self Assessment tax return online by 31 January 2027. Paper returns must be filed by 31 October 2026. A late filing penalty of £100 applies immediately after the deadline, increasing the longer you delay.

💰

Self Assessment Tax Payment

31 January 2027

Pay your 2025/26 tax bill and first Payment on Account for 2026/27 by 31 January 2027. Interest is charged on late payments from 1 February. Set up a budget payment plan with HMRC if you're struggling — available through your Government Gateway account.

📅

Second Payment on Account

31 July 2027

Your second advance payment for 2026/27 is due 31 July 2027. This is 50% of your previous year's tax bill (same as the January POA payment). You can apply to reduce this if your income has fallen.

🧾

VAT Return Deadline

1 month + 7 days after quarter end

VAT-registered businesses must file quarterly returns and pay any VAT due via Making Tax Digital (MTD) compatible software. The filing and payment deadline is 1 month and 7 days after the end of each VAT quarter.

📊

P60 Issued by Employer

By 31 May 2027

Your employer must give you a P60 (showing your total earnings and tax paid for the 2026/27 tax year) by 31 May 2027. Keep this document — you need it for Self Assessment, mortgage applications, and benefits claims.

🗓️

New Tax Year Begins

6 April 2027

The 2027/28 tax year starts on 6 April 2027. Tax codes, thresholds, and NI rates may update. Check your tax code at the start of each year — errors are common if you changed jobs, started a side business, or received a pay rise.

UK Tax FAQ 2026/27 — Your Questions Answered

Based on HMRC-confirmed rates. Updated for the 2026/27 tax year.

The UK personal allowance for 2026/27 is £12,570. This is the amount you can earn each tax year completely free of income tax. It has been frozen at this level since 2021/22 and is due to remain at £12,570 until at least April 2031. If your income exceeds £100,000, the allowance is reduced by £1 for every £2 above that threshold, disappearing entirely at £125,140. Source: HMRC GOV.UK.

UK income tax bands for England, Wales and Northern Ireland in 2026/27: 0% on the first £12,570 (Personal Allowance); 20% Basic Rate on £12,571–£50,270; 40% Higher Rate on £50,271–£125,140; 45% Additional Rate above £125,140. All thresholds are unchanged from 2025/26 and frozen until 2031. Scotland uses different rates set by the Scottish Government, ranging from 19% Starter Rate to 48% Top Rate.

As an employee in 2026/27, you pay Class 1 National Insurance at 8% on earnings from £12,570 to £50,270, and 2% on earnings above £50,270. There is no NI below £12,570. On a £35,000 salary, your annual NI is approximately £1,794. Self-employed people pay Class 4 NI at 6% on profits between £12,570 and £50,270, and 2% above. Class 2 NI was abolished as a compulsory payment from April 2024.

The 60% tax trap applies to earnings between £100,000 and £125,140. In this range, you lose £1 of your personal allowance for every £2 earned above £100,000. This creates an effective marginal rate of 60%: 40% Higher Rate tax on the extra income, plus 20% in lost allowance that becomes taxable. Including NI (2%), the effective rate is 62%. Over 2 million UK taxpayers are now caught in this zone. Making pension contributions to bring your income below £100,000 is the most effective escape route.

Payment on Account is HMRC's advance tax payment system for self-employed people. If your annual Self Assessment tax bill exceeds £1,000, you must make two advance payments towards the following year's bill. Each payment is 50% of your current year's bill. The first POA is due on 31 January (alongside that year's tax bill), and the second on 31 July. Example: a £4,000 tax bill means your January payment is £6,000 (£4,000 current year + £2,000 first POA). This catches many first-year freelancers by surprise.

A sole trader with £40,000 profit in 2026/27 pays: Income Tax of £5,486 (20% on £27,430 taxable income after Personal Allowance) and Class 4 NI of £1,645.80 (6% on £27,430). Total tax: £7,131.80. Net take-home: £32,868.20 (approximately £2,739/month). On top, set aside an additional 12–15% for Payment on Account contributions. Class 2 NI (£3.50/week) is no longer compulsory but can be paid voluntarily to protect your State Pension record.

UK VAT rates in 2026: 20% standard rate (most goods and services including electronics, clothing, professional services, restaurants); 5% reduced rate (domestic gas and electricity, children's car seats, energy-saving materials, nicotine patches); 0% zero rate (most food, children's clothing, books, newspapers, most medicines). The VAT registration threshold is £90,000 in taxable turnover in any rolling 12-month period. Once registered, you must charge VAT on your sales.

Fiscal drag happens because tax thresholds are frozen while wages continue to rise with inflation. The UK personal allowance has been frozen at £12,570 since 2021/22 and will remain frozen until April 2031. As wages grow by 3–5% per year, more of your income falls into taxable bands — even if you haven't received a meaningful pay rise in real terms. If your salary rose from £45,000 to £50,000 between 2022 and 2026, your tax bill increased by far more than just the 20% basic rate on the extra £5,000, because the frozen thresholds mean no compensating rise in your tax-free amount.