How Much Tax Do You Pay After the £12,500 Allowance?

In the 2025/26 tax year, every pound you earn above the £12,570 Personal Allowance is taxed at 20% up to £50,270, then 40% up to £125,140, and 45% on anything above that. So how much tax do you pay after the Personal Allowance depends entirely on which band your income sits in, and most employees never leave the 20% band. The £12,500 figure people often remember was the allowance in 2019/20; it has been £12,570 since 2021 and remains frozen at that level.¹ National Insurance is deducted on top of income tax, which is why the total taken from your payslip usually feels larger than the headline rate.

The 20% Basic Rate Band

Once your annual income crosses £12,570, you pay 20% income tax on each additional pound. The basic rate band runs up to £50,270, covering £37,700 of earnings above the Personal Allowance.¹ Only the income inside that band is taxed at 20%. Your first £12,570 stays entirely tax-free, provided your total income is under £100,000.

A worked example makes the maths obvious. If you earn £15,000, your taxable income is £2,430, and 20% of that gives an annual tax bill of £486. Earn £30,000 and your taxable income is £17,430, producing £3,486 of income tax. Every pound in this band is taxed identically, so you can work out any basic rate salary with the same simple sum.

Higher and Additional Rates

Earnings above £50,270 fall into the higher rate band and are taxed at 40%. This applies up to £125,140.¹ Above £125,140 the additional rate of 45% applies with no upper limit.

Because the system is progressive, crossing into a higher band doesn’t retax the income below it. Someone on £60,000 pays nothing on the first £12,570, 20% on the next £37,700, and 40% only on the £9,730 sitting above £50,270. That comes to roughly £11,432 of income tax, an effective rate of about 19% across the whole salary. The marginal rate (the rate on your last pound earned) is not the same as the effective rate (what you actually pay across all your income), and confusing the two is what makes people overestimate their tax burden.

The 60% Trap Between £100,000 and £125,140

Once adjusted net income passes £100,000, the Personal Allowance shrinks by £1 for every £2 above the threshold, disappearing completely at £125,140.¹ Inside that band the effective marginal rate is 60%: you pay 40% on the extra earnings and lose tax-free allowance on top, which gets taxed at 20% as well.

The practical effect surprises people. A pay rise from £99,000 to £105,000 looks like £6,000 gross, but the take-home increase is much smaller because £5,000 of previously tax-free allowance is now being taxed. Pension contributions are the most common way to bring adjusted net income back below £100,000 and reclaim the full allowance.

National Insurance on Top

Income tax is only part of what leaves your payslip. Employees also pay Class 1 National Insurance: 8% on earnings between the Primary Threshold and the Upper Earnings Limit, then 2% above. For 2025/26 the Primary Threshold is £242 per week and the Upper Earnings Limit is £967 per week, which broadly line up with the Personal Allowance and the higher rate threshold.²

For a basic rate taxpayer, the combined deduction on each pound of taxable income is 28%: 20% income tax plus 8% NI. That combined figure is the number you actually feel, and it’s what decides how much a pay rise or overtime shift really adds to your bank account. Self-employed workers pay National Insurance under a different structure, with Class 2 as a flat weekly amount and Class 4 as a percentage of profits.

Scottish Income Tax Is Different

If you live in Scotland, you pay Scottish income tax on non-savings and non-dividend income, and the bands are not the same. Scotland has six bands rather than three, running from a 19% starter rate to a 48% top rate.³ The 2025/26 rates are:

Starter rate (19%): £12,571 to £15,397
Basic rate (20%): £15,398 to £27,491
Intermediate rate (21%): £27,492 to £43,662
Higher rate (42%): £43,663 to £75,000
Advanced rate (45%): £75,001 to £125,140
Top rate (48%): above £125,140

Scottish taxpayers earning under about £28,000 pay slightly less income tax than people on the same salary elsewhere in the UK. Above that, they pay more, and the gap widens quickly because the higher rate starts at £43,663 in Scotland compared with £50,271 in the rest of the UK.³ National Insurance rates are UK-wide and don’t change.

Savings and Dividends Follow Different Rules

Interest and dividends aren’t taxed at the standard income tax rates. Basic rate taxpayers get a £1,000 Personal Savings Allowance for interest, higher rate taxpayers get £500, and additional rate taxpayers get nothing.⁴ Interest above the allowance is taxed at your normal income tax rate.

Dividends have their own rates, which are lower than the rates on employment income. The first £500 of dividends is covered by the dividend allowance for 2025/26 and is tax-free. Above that, basic rate taxpayers pay 8.75%, higher rate 33.75%, and additional rate 39.35%. These rates apply UK-wide, including in Scotland.

How the Tax Gets Collected

Most employees never file a return because Pay As You Earn deducts income tax and National Insurance from each pay packet automatically.⁵ Your employer applies a tax code issued by HMRC; the standard code for 2025/26 is 1257L, which reflects the £12,570 allowance. A code of BR or D0 means all income from that source is being taxed at the basic or higher rate with no allowance applied, which is normal for second jobs but worth checking on your payslip at least once a year.

Self-employed workers, landlords, and anyone with substantial income outside PAYE file a Self-Assessment return by 31 January following the end of the tax year, with any tax owed due on the same date.⁶ Missing that deadline brings an automatic £100 penalty even if no tax is owed.⁷

Reliefs That Reduce What You Pay

A few reliefs shift the numbers. The Marriage Allowance lets a lower-earning spouse or civil partner transfer 10% of their Personal Allowance to their partner, cutting the recipient’s tax bill by up to £252 a year. The transferring partner must earn under £12,570 and the recipient must be a basic rate taxpayer. Claims can be backdated up to four years, and it remains one of the most underclaimed reliefs in the system.

Pension contributions receive tax relief at your marginal rate. For a higher rate taxpayer, every £60 paid into a pension is effectively topped up to £100. And for anyone inside the 60% band between £100,000 and £125,140, pension contributions can restore the Personal Allowance and dramatically improve the after-tax value of that income. The Blind Person’s Allowance provides additional tax-free income for people registered as severely sight-impaired, and any unused portion can be transferred to a spouse or civil partner.⁸

1
GOV.UK. Income Tax rates and Personal Allowances
2
GOV.UK. Rates and allowances: National Insurance contributions
3
gov.scot. Scottish Income Tax 2025 to 2026: factsheet
4
GOV.UK. Tax on savings interest: How much tax you pay
5
GOV.UK. Income Tax: introduction – Section: Pay As You Earn (PAYE)
6
GOV.UK. Self Assessment tax returns: Deadlines
7
GOV.UK. Self Assessment tax returns: Penalties
8
GOV.UK. Blind Person’s Allowance