The basic rate of income tax in the UK is 20%, and for the 2025/26 tax year it applies to taxable income between £12,571 and £50,270.{1GOV.UK. Income Tax Rates and Personal Allowances} Below that, you pay nothing on the first £12,570 thanks to the Personal Allowance. Above it, the higher rate of 40% takes over. These thresholds have been frozen since 2021/22 and are set to stay frozen until at least April 2028, which quietly drags more earners into higher bands as wages rise.
The Full Set of Bands for 2025/26
The 20% basic rate is one slice of a wider structure. For taxpayers in England, Wales, and Northern Ireland, the bands look like this:
- Personal Allowance (0%): up to £12,570
- Basic rate (20%): £12,571 to £50,270
- Higher rate (40%): £50,271 to £125,140
- Additional rate (45%): over £125,140
Rates and thresholds are set through the annual Finance Act.{2Legislation.gov.uk. Finance Act 2025} A future Chancellor can override the freeze in any budget, but until then these figures hold.
How the 20% Actually Applies to Your Pay
Only the income that falls inside the basic rate band is taxed at 20%. A common misconception is that crossing into the basic rate means your whole salary is taxed at that level. It doesn’t. UK income tax works in layers, and each band only touches the slice of income sitting inside it.
Take someone earning £35,000. The first £12,570 is covered by the Personal Allowance, so nothing is owed on that. The remaining £22,430 sits inside the basic rate band and is taxed at 20%, giving an income tax bill of £4,486. If that same person got a pay rise to £55,000, only the £4,730 above £50,270 would be taxed at 40%. Everything below that would still be taxed exactly as before.
Most employees never have to work this out. Under PAYE, your employer deducts income tax from each paycheck using a tax code issued by HMRC. The standard code is 1257L, which tells the employer to give you £12,570 of tax-free pay across the year before applying the 20% rate.{3GOV.UK. Understanding Your Employees Tax Codes} A different code usually means HMRC is adjusting for untaxed income, benefits in kind, or an underpayment from a previous year.
What Income Gets Taxed at the Basic Rate
Employment wages are the obvious category, but the 20% rate also picks up self-employment profits, pension income (state and private), and rental income after allowable expenses. Add all these together, and anything above your Personal Allowance and inside the basic rate band is taxed at 20%.
Savings Interest
Savings income has its own layer of protection. Basic rate taxpayers get a Personal Savings Allowance of £1,000 a year, so the first £1,000 of interest from bank accounts and similar deposits is tax-free.{4GOV.UK. Tax on Savings Interest – How Much Tax You Pay} Higher rate taxpayers get £500, and additional rate taxpayers get nothing. Interest above the allowance is taxed at your marginal rate, which for a basic rate taxpayer is 20%.
Dividends
Dividends follow different rules. Everyone gets a £500 dividend allowance regardless of tax band. Above that, dividends are taxed at 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers, and 39.35% for additional rate taxpayers. The rates sit below the equivalent employment rates because dividends come from profits that have already been through corporation tax.
The £100,000 Trap
The £12,570 Personal Allowance isn’t guaranteed forever. Once your adjusted net income passes £100,000, you lose £1 of allowance for every £2 above that threshold. By £125,140, the allowance is gone.{1GOV.UK. Income Tax Rates and Personal Allowances}
Inside that £100,000 to £125,140 band, the effective marginal rate is 60%: the 40% higher rate plus the loss of tax-free allowance on the same income. Someone earning £110,000 has already lost £5,000 of Personal Allowance, so £5,000 that would have been tax-free is now taxed at 40%. Pension contributions and Gift Aid donations that pull adjusted income back below £100,000 restore the full allowance.
Scotland Has Its Own Bands
If you live in Scotland, your non-savings, non-dividend income is taxed under a different structure. The Scottish Parliament sets its own rates under the Scotland Act 1998, and it runs six bands instead of three.{5Legislation.gov.uk. Scotland Act 1998} For 2025/26:
- 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%): over £125,140
Scotland still has a 20% basic rate, but it covers a much narrower slice of income.{6Scottish Government. Scottish Income Tax 2025 to 2026 Factsheet} A Scottish taxpayer earning £35,000 pays 19% on the starter slice, 20% on the basic slice, then 21% on everything above £27,491, rather than a flat 20% across the top of the salary. In practice, Scottish residents earning above roughly £28,000 pay slightly more than someone with the same salary elsewhere in the UK, and those earning below pay slightly less. Your tax code carries an “S” prefix (such as S1257L) to tell your employer to apply Scottish rates. The Personal Allowance is still £12,570 UK-wide, and savings and dividend income is taxed under the UK-wide rates wherever you live.
Wales and Northern Ireland
The Senedd can set Welsh income tax rates under the Government of Wales Act 2006.{7legislation.gov.uk. Government of Wales Act 2006} So far it has kept them identical to England and Northern Ireland, so the 20% basic rate applies in the same way and across the same band. Welsh taxpayers see a “C” prefix on their tax code, but the numbers land the same. Northern Ireland has no devolved income tax power and follows the standard UK rates.
Don’t Forget National Insurance
Income tax isn’t the only deduction on your payslip. Employees also pay National Insurance, which funds the state pension and certain benefits. For 2025/26, the employee rate is 8% on earnings between £242 and £967 per week, dropping to 2% above £967 per week. That means a basic rate taxpayer is typically losing a combined 28% to income tax and National Insurance across much of their pay, not just 20%. Self-employed workers pay a different class at different rates, but the principle holds: the headline 20% understates the real deduction from your earnings, and it’s worth keeping both in mind when you look at a salary offer or plan your budget.