Adding one penny to the basic rate of UK income tax would raise around £6.9 billion a year, according to the latest HMRC estimates for the 2026-27 financial year.1HM Revenue & Customs. Direct Effects of Illustrative Tax Changes Bulletin June 2025 That is the figure behind almost every “1p on income tax” headline. The number falls sharply if the penny is added to the higher or additional rate instead, and it covers England and Northern Ireland only. Scotland and Wales run separate calculations.
How Much Each Band Would Raise
HMRC’s Ready Reckoner sets out what a 1p change to each rate would bring in during 2026-27:1HM Revenue & Customs. Direct Effects of Illustrative Tax Changes Bulletin June 2025
- Basic rate (20% to 21%): £6.9 billion
- Higher rate (40% to 41%): £1.6 billion
- Additional rate (45% to 46%): £145 million
The basic rate raises nearly 48 times more than the additional rate. That is not because basic-rate taxpayers are wealthy. It is because there are so many of them. The vast majority of income tax payers sit in the basic band. Higher-rate payers are a smaller group, and additional-rate payers are typically estimated at only one to two per cent of all income tax payers. If a chancellor wants meaningful revenue from income tax in a single year, the basic rate is the only lever that moves the total in billions.
What 1p Would Cost You
The personal allowance of £12,570 is not touched by a rate rise, so you only pay extra on income above that threshold, and only within the affected band.2GOV.UK. Income Tax Rates and Personal Allowances
If you earn £30,000, your taxable income in the basic band is £17,430. A 1p rise on the basic rate costs you £174.30 a year, or about £14.50 a month. At £50,270, the top of the basic band, the maximum extra cost is around £377 a year. Someone earning £80,000 would pay an extra £297 a year from a 1p rise on the higher rate alone, on top of any change to the basic rate. The amounts are modest per person, which is exactly why the national total is so large. Small sums from millions of pay packets add up quickly.
Why the Additional-Rate Figure Is So Small
HMRC’s numbers are not simple arithmetic. They already build in how taxpayers change their behaviour when rates move. Some people shift income into pensions or tax-free accounts. Others take income through a company rather than as salary. High earners have the most flexibility and tend to respond the most.
At the basic rate, this drag is limited because most workers on PAYE have few ways to restructure their pay. At the additional rate, it is much larger. HMRC flags “significant uncertainty” around the modelling for top-rate taxpayers, and one number gives the flavour: a 1p rise on the additional rate is estimated to raise £145 million, but a 1p cut is estimated to cost £175 million.1HM Revenue & Customs. Direct Effects of Illustrative Tax Changes Bulletin June 2025 The asymmetry reflects the assumption that a lower top rate draws some economic activity back rather than losing revenue pound for pound.
Scotland and Wales Are Counted Separately
The £6.9 billion headline covers England and Northern Ireland, plus block grant adjustments for the devolved nations. It does not include the portion of income tax that Scotland and Wales control directly.1HM Revenue & Customs. Direct Effects of Illustrative Tax Changes Bulletin June 2025
The Scottish Parliament sets its own rates and bands on non-savings, non-dividend income for Scottish taxpayers, and now uses six bands running from a 19 per cent starter rate to a 48 per cent top rate for 2025-26.3GOV.UK. Income Tax in Scotland: Current Rates The Scottish Government estimates that adding 1p to every Scottish income tax rate at once would raise around £652 million in 2026-27.4Scottish Government. Scottish Budget 2026 to 2027: Scottish Tax Ready Reckoners
The Senedd sets Welsh Rates of Income Tax by adding a rate in pence to a reduced UK rate.5HM Revenue & Customs. Welsh Rates of Income Tax Annual Report 2025 A 1p rise across Welsh rates would raise roughly £299 million at the basic rate, £47 million at the higher rate, and £7 million at the additional rate, or about £353 million combined.6Welsh Government. Welsh Rates of Income Tax Ready Reckoner 2025 to 2026
What £6.9 Billion Actually Buys
The basic-rate figure is roughly the annual budget of a mid-sized government department. It will not close a large structural deficit on its own or fund something the size of social care reform. It is enough to make a visible difference to a specific service, which is why it keeps turning up in manifesto costings and budget leaks. Large enough to matter, small enough to sound plausible, simple enough for a headline.
So when a politician promises to raise or cut “1p on income tax,” the band matters more than the penny. A penny on the basic rate touches millions of workers and raises billions. A penny on the additional rate touches a narrow group and raises a fraction of that. News coverage often blurs the two, but they are very different policies with very different effects.