UK Income Tax Bands, Rates and Personal Allowance: Scottish Rates

For the 2026/27 tax year, the UK income tax bands, rates, and Personal Allowance start with a tax-free amount of £12,570, above which earnings are taxed at 20%, 40%, and 45% in England, Wales, and Northern Ireland, or at 19%, 20%, 21%, 42%, 45%, and 48% in Scotland.¹ The Personal Allowance and the main band thresholds have been frozen since 2021 and stay frozen through 2027/28, so more of what you earn slides into higher bands each year as wages rise.²

The Personal Allowance

Everyone gets £12,570 of income each year before any income tax applies. If you’re employed, your allowance is built into your tax code and applied automatically through PAYE. If you file a tax return, it’s taken into account there.¹

The allowance was frozen in 2021 and stays at £12,570 through the 2027/28 tax year, after which it’s expected to rise with inflation again.² Because wages typically rise while the tax-free amount stays flat, a slightly larger share of your income gets taxed each year. This effect is sometimes called fiscal drag.

The allowance is also tapered away at higher incomes, which is covered further down.

Tax Rates for England, Wales, and Northern Ireland

Once your income exceeds the £12,570 Personal Allowance, it falls into one of three bands. These rates apply if you live in England, Wales, or Northern Ireland. Wales technically sets its own income tax rates through the Senedd, but for 2026/27 the Welsh rates produce the same result as the rest of the UK outside Scotland.

Basic rate of 20% on taxable income from £12,571 to £50,270
Higher rate of 40% on taxable income from £50,271 to £125,140
Additional rate of 45% on taxable income above £125,140

The basic rate limit of £37,700 (which added to the £12,570 allowance gives the £50,270 higher-rate threshold) is frozen through 2027/28 alongside the Personal Allowance.³

Tax Rates for Scotland

The Scotland Act 2016 gave the Scottish Parliament power to set its own income tax rates on non-savings, non-dividend income.⁴ Scotland uses six bands rather than three. For 2026/27, they are:

Starter rate of 19% from £12,571 to £16,537
Basic rate of 20% from £16,538 to £29,526
Intermediate rate of 21% from £29,527 to £43,662
Higher rate of 42% from £43,663 to £75,000
Advanced rate of 45% from £75,001 to £125,140
Top rate of 48% above £125,140

The practical effect is that Scottish taxpayers earning under about £28,000 pay slightly less income tax than someone in England on the same salary, while those earning more pay progressively more.⁵

Scottish rates apply only to employment income, self-employment profits, pension income, and rental income. Savings interest and dividend income are still taxed at the UK-wide rates regardless of where you live.

How the Bands Actually Apply

A common misconception is that crossing into a higher band means all of your income is taxed at the higher rate. It isn’t. Each band applies only to the slice of income that falls within it, so no one takes home less because they got a small pay rise.

Take someone in England earning £60,000. The first £12,570 is tax-free. The next £37,700 is taxed at 20%, which is £7,540. Only the remaining £9,730 above £50,270 is taxed at 40%, adding £3,892. Total income tax comes to £11,432, an effective rate of roughly 19%, well below the 40% headline that applies to their top slice.

Every additional pound you earn is taxed at your marginal rate, not your average rate. If you’re weighing whether overtime or a bonus is worth taking, the marginal rate is the figure that matters.

What Happens Above £100,000

Once your adjusted net income passes £100,000, the Personal Allowance starts shrinking. You lose £1 of allowance for every £2 of income above that threshold.³ By £125,140 the allowance has gone entirely, and every pound of your income is taxable.¹

This produces what’s often called the 60% tax trap. Between £100,000 and £125,140 your effective marginal rate on extra earnings is 60%, not the 40% you might expect. For every extra £100 you earn in that band, you pay £40 in higher-rate tax and also lose £50 of Personal Allowance, so another £50 of income that used to be tax-free is now taxed at 40%, costing another £20. That’s £60 gone from every £100.

Pension contributions are one of the most effective ways to work around the taper, because they reduce the adjusted net income figure HMRC uses. Someone earning £110,000 who contributes £10,000 to a pension brings adjusted net income down to £100,000 and restores the full Personal Allowance. The standard annual pension allowance for 2026/27 is £60,000, though this itself tapers for very high earners above £260,000.⁶

Tax on Savings Interest

Savings interest has its own allowance sitting on top of the Personal Allowance. Basic rate taxpayers can earn up to £1,000 in savings interest tax-free, and higher rate taxpayers £500. Additional rate taxpayers get no savings allowance at all.⁷ Interest above the allowance is taxed at your normal income tax rate.

Tax on Dividends

The first £500 of dividend income each year is tax-free under the Dividend Allowance, down sharply from £2,000 in 2022/23. Above that, for 2026/27, dividends are taxed at 10.75% for basic rate taxpayers, 35.75% for higher rate taxpayers, and 39.35% for additional rate taxpayers. These rates sit below employment income rates but still add up quickly for company directors who pay themselves partly in dividends.

National Insurance on Top of Income Tax

Income tax isn’t the only deduction from your pay. National Insurance applies separately and changes the real picture of what you keep.

Employees pay Class 1 National Insurance at 8% on earnings between the primary threshold (£242 per week, roughly £12,570 per year) and the upper earnings limit, with a reduced rate of 2% above that.⁸ For a basic rate taxpayer, combining 20% income tax with 8% National Insurance means roughly 28p of each extra pound goes in deductions.

Self-employed workers pay Class 4 National Insurance at 6% on profits between £12,570 and the upper profits limit, and 2% above that.⁸

Smaller Allowances Worth Knowing

Marriage Allowance

If you earn less than the Personal Allowance and your spouse or civil partner is a basic rate taxpayer, you can transfer £1,260 of your unused allowance to them, cutting their tax bill by up to £252 a year.⁹ You apply through GOV.UK, and the transfer stays in place until you cancel it or your circumstances change.

Blind Person’s Allowance

If you’re registered as severely sight impaired, you get an extra £3,250 on top of the standard Personal Allowance for 2026/27, taking your tax-free income to £15,820.¹⁰ Unlike the main Personal Allowance, this figure is indexed to inflation each year, and any unused portion can be transferred to your spouse or civil partner.

1
GOV.UK. Income Tax Rates and Allowances for Current and Previous Tax Years
2
GOV.UK. Income Tax Personal Allowance and the Basic Rate Limit, and Certain National Insurance Contributions Thresholds From 6 April 2026 to 5 April 2028
3
GOV.UK. Income Tax Rates and Personal Allowances
4
Legislation.gov.uk. Scotland Act 2016 – Income Tax
5
Scottish Government. Scottish Income Tax 2026 to 2027 Technical Factsheet
6
GOV.UK. Pension Schemes Rates
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GOV.UK. Tax on Savings Interest: How Much Tax You Pay
8
GOV.UK. Rates and Allowances: National Insurance Contributions
9
GOV.UK. Marriage Allowance
10
Legislation.gov.uk. The Income Tax (Indexation of Blind Persons Allowance and Married Couples Allowance) Order 2026