UK income tax, National Insurance and the 60% trap
How the bands stack for 2025-26, why earnings between £100,000 and £125,140 are taxed at an effective 60%, and where Scotland differs.
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In short
- The personal allowance is £12,570 and it tapers away above £100,000 at £1 for every £2 earned, creating an effective 60% marginal rate up to £125,140.
- National Insurance is a second tax with its own thresholds — 8% between £12,570 and £50,270, then 2%.
- On £60,000 the combined bill is £11,432 of tax and £3,211 of NI, leaving £45,357.
- Scotland has six bands and taxes middle and higher earners more. The same £60,000 salary pays £1,796 more tax there.
- Pension contributions reduce taxable income, which makes them worth 60% relief inside the taper band.
UK income tax is charged in bands on income above a personal allowance, and National Insurance is charged separately on a different set of thresholds. Understanding a payslip means following both.
The bands for 2025-26
income tax = Σ (income falling in each band × that band's rate), the bands applying to income above the personal allowance — and that allowance itself tapers: personal allowance = 12570 − max(0, (income − 100000) ÷ 2).
Outside Scotland, on income after the personal allowance of £12,570:
| Band | Taxable income | Rate |
|---|---|---|
| Personal allowance | First £12,570 | 0% |
| Basic rate | Next £37,700 | 20% |
| Higher rate | Up to £125,140 | 40% |
| Additional rate | Above £125,140 | 45% |
In salary terms the higher rate begins at £50,270, which is the personal allowance plus the basic-rate band.
National Insurance, Class 1 for employees:
| Earnings | Rate |
|---|---|
| Up to £12,570 | 0% |
| £12,570 – £50,270 | 8% |
| Above £50,270 | 2% |
Note that NI falls to 2% above £50,270 — the opposite direction to income tax. Combined, the marginal rate is 28% in the basic band, 42% in the higher band, and 47% at the top.
What that means in practice
| Salary | Income tax | NI | Take-home | Effective rate |
|---|---|---|---|---|
| £20,000 | £1,486 | £594 | £17,920 | 10.4% |
| £30,000 | £3,486 | £1,394 | £25,120 | 16.3% |
| £50,000 | £7,486 | £2,994 | £39,520 | 21.0% |
| £60,000 | £11,432 | £3,211 | £45,357 | 24.4% |
| £100,000 | £27,432 | £4,011 | £68,557 | 31.4% |
| £150,000 | £53,703 | £5,011 | £91,286 | 39.1% |
The effective rate is well below the marginal rate at every level, because the bands are slices rather than a single rate applied to everything. Someone on £60,000 is a "40% taxpayer" and pays 24.4% of their salary in tax and NI.
The 60% trap
This is the most consequential quirk in the system and it is not in any rate table.
Above £100,000 the personal allowance is withdrawn at £1 for every £2 of income. Earning £2 more removes £1 of allowance, so £2 of income becomes £3 of newly taxable income at 40%, which is £1.20 of tax on £2 earned — a 60% marginal rate. Adding 2% NI makes it 62%.
It applies from £100,000 until the allowance reaches zero at £125,140, and above that the rate drops back to 45% plus 2%.
| Salary | Marginal rate including NI |
|---|---|
| £50,270 – £100,000 | 42% |
| £100,000 – £125,140 | 62% |
| Above £125,140 | 47% |
A £25,000 band where the marginal rate is higher than at any income above it. A pay rise from £100,000 to £125,000 delivers about £9,500 of it.
The standard response is a pension contribution. Contributions reduce adjusted net income, so putting the excess above £100,000 into a pension restores the allowance and gets 60% effective relief. Someone on £125,000 contributing £25,000 recovers the full allowance, and the contribution costs them roughly £10,000 of take-home pay.
Salary sacrifice does the same and also saves the NI, which makes it slightly better again where an employer offers it.
Scotland is different
Scotland has set its own income tax rates since 2017 and now uses six bands:
| Band | Rate |
|---|---|
| Starter | 19% |
| Basic | 20% |
| Intermediate | 21% |
| Higher | 42% |
| Advanced | 45% |
| Top | 48% |
The higher rate starts at a lower income than in the rest of the UK, and the rates above it are higher. On £60,000 a Scottish taxpayer pays £13,228 against £11,432 — £1,796 more.
Two things do not change. National Insurance is reserved, so it is identical across the UK. And the personal allowance and its taper are also reserved, so the 60% trap applies in Scotland too, at 63% including the advanced rate.
Which rates apply depends on where you live, not where you work. HMRC assigns an S-prefixed tax code based on your registered address.
Reading a tax code
The code tells your employer how much to leave untaxed. 1257L is the standard: allowance of £12,570, divided by ten, with L for the basic personal allowance.
Others worth recognising:
- BR — all income taxed at basic rate, normal for a second job
- D0 and D1 — all at higher and additional rate respectively
- K prefix — you owe more than your allowance covers, usually from benefits in kind
- S prefix — Scottish rates
- W1 / M1 / X suffix — emergency code, taxing each period in isolation
An emergency code frequently over-deducts and corrects itself once HMRC has the full picture, though it is worth checking rather than waiting.
What is not in the calculator
Student loan repayments, 9% above the plan threshold — £27,295 for Plan 2, £25,000 for Plan 4, £24,990 for Plan 5 — plus 6% for a postgraduate loan. This is not technically a tax and behaves exactly like one on a payslip, raising the marginal rate in the basic band to 37%.
The High Income Child Benefit Charge, which claws back child benefit between £60,000 and £80,000 of adjusted net income. For a family with three children it adds roughly 20 points to the marginal rate across that band.
Dividend and savings income, which have their own allowances and rates and are taxed after earned income.
Blind person's allowance, marriage allowance, and Gift Aid, all of which adjust the position.
Where the arithmetic actually matters
Crossing £100,000. The single most valuable check in the UK system. A bonus taking you into the taper is worth about 38 pence in the pound before any pension contribution.
Crossing £50,270 with children. Higher rate tax and the child benefit charge arrive close together, and the combined effect surprises people.
Deciding a pension contribution. Relief is at your marginal rate, so the same £1,000 contribution costs £800 of take-home at basic rate, £600 at higher rate, and £400 inside the taper.
Comparing job offers across the border. A Scottish offer needs roughly £3,000 more at the £60,000 level to leave the same take-home pay.
Pension contributions, and the relief you get
A pension contribution is the main lever an employee has on their tax bill, and how it is administered changes what you see.
Net pay arrangement, used by most workplace schemes. The contribution comes out of gross pay before tax, so relief at your marginal rate is automatic and nothing needs claiming.
Relief at source, used by personal pensions and some workplace schemes. You pay from taxed income and the provider reclaims 20% from HMRC. A higher or additional rate taxpayer must claim the remaining 20% or 25% through a self-assessment return — and a great many never do.
Salary sacrifice, where you formally give up salary in exchange for an employer contribution. This saves National Insurance as well as income tax, and many employers pass on their own NI saving too, which makes it the most efficient of the three where it is offered.
The annual allowance is £60,000 including employer contributions, tapering for very high earners, with unused allowance carried forward from three years.
Inside the £100,000 to £125,140 taper the effective relief is 60%, and with salary sacrifice it is higher still. There is no other point in the UK system where a pound saved is worth as much.
Checking your own position
Three habits catch most errors.
Read the tax code on the payslip, particularly after a job change, a bonus or a benefit in kind starting. An emergency code left uncorrected for months is common and always recoverable.
Check the P60 against your own figure at the year end. Overpayments are refunded automatically only when HMRC notices, and it does not always.
File a return if you are inside the taper, claiming higher-rate pension relief, or subject to the child benefit charge. Each of those puts money at stake that PAYE alone will not settle correctly.
What this calculator assumes
- 2025-26 rates and thresholds for England, Wales and Northern Ireland, with Scottish rates selectable.
- Employment income only. Dividends, savings interest, rental and self-employment income are taxed under different rules.
- Class 1 employee National Insurance. Self-employed Class 2 and 4 differ.
- The standard personal allowance with the taper above £100,000 applied automatically.
- Student loan repayments and the child benefit charge are not included unless you select them.