What Are Income Tax Bands?
Income tax bands determine how much tax you pay on your earnings. The UK uses a progressive tax system, meaning different portions of your income are taxed at different rates.
2025/26 Tax Bands
| Band | Taxable Income | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic Rate | £12,571 to £50,270 | 20% |
| Higher Rate | £50,271 to £125,140 | 40% |
| Additional Rate | Over £125,140 | 45% |
Key Points
- The Personal Allowance is reduced by £1 for every £2 earned over £100,000
- At £125,140, the Personal Allowance is completely eliminated
- Scottish taxpayers have different bands and rates
Practical Example
If you earn £55,000 per year:
- First £12,570 is tax-free (Personal Allowance)
- Next £37,700 (£12,571 to £50,270) taxed at 20% = £7,540
- Remaining £4,730 (£50,271 to £55,000) taxed at 40% = £1,892
- Total income tax: £9,432
Tip: Consider pension contributions to reduce your taxable income below higher rate thresholds.
Tax Planning Strategies
- Maximise pension contributions to reduce taxable income
- Use your ISA allowance (£20,000) for tax-free savings
- Consider salary sacrifice arrangements with your employer
- Claim all eligible tax reliefs and deductions