What is the Personal Allowance and how does it work?

The Personal Allowance (£12,570 for 2025/26) is the amount you can earn each year completely tax-free. If you earn over £100,000, your allowance is reduced by £1 for every £2 above that threshold, disappearing entirely at £125,140.

What is a UK tax code and why does it matter?

Your tax code tells your employer how much tax-free income you are entitled to. The most common code is 1257L, giving the standard £12,570 Personal Allowance for 2025/26.

How does Salary Sacrifice affect my take-home pay?

Salary Sacrifice reduces your gross salary, meaning you pay less Income Tax and National Insurance. It is one of the most tax-efficient ways to contribute to a pension.

When do I need to repay a Student Loan in the UK?

You repay 9% of income above your plan's threshold. For 2025/26: Plan 1 £26,065, Plan 2 £28,470, Plan 4 £32,745, Plan 5 £25,000. Postgraduate loans are repaid at 6% above £21,000.

What is the 60% tax trap in the UK?

Earners between £100,000–£125,140 face an effective 60% marginal rate because their £12,570 Personal Allowance is tapered away at £1 per £2 earned above £100,000, on top of the 40% Higher Rate income tax.

What is the difference between effective and marginal tax rate?

The marginal rate is the rate on your last pound earned. The effective rate is total tax as a percentage of gross income — always lower because progressive bands mean lower earnings are taxed less.

UK Tax Code Checker 2025/26: Calculate Your Take-Home Pay Instantly

How Is UK Tax Calculated?

A simple, visual guide to Income Tax, National Insurance and take-home pay for 2025/26.

📊 Income Tax Bands 2025/26

UK Income Tax is charged in progressive bands — you only pay the higher rate on earnings above each threshold, never on your whole income.

Personal
Allowance

Up to £12,570

Basic
Rate

£12,571 – £50,270

20%

Higher
Rate

£50,271 – £125,140

40%

Additional
Rate

Over £125,140

45%

⚠️ Tax Trap: Earning between £100,000–£125,140? Your Personal Allowance tapers at £1 per £2 earned, creating an effective 60% marginal rate in this band.

🛡️ National Insurance 2025/26

National Insurance (NI) contributions fund the NHS and State Pension. In 2025/26, the employee rate was cut to 8% on earnings between the Primary Threshold and Upper Earnings Limit.

Earnings	Rate	What it Funds
Up to £12,570	0%	No NI due
£12,571 – £50,270	8%	NHS, State Pension, Benefits
Over £50,270	2%	Additional rate on excess

🏢 Employer NI: Your employer also pays 15% NI on earnings above £5,000 — this is a cost to them, not deducted from your salary. Toggle it on in the calculator to see the full employment cost.

🏴󠁧󠁢󠁳󠁣󠁴󠁿 Scottish Income Tax Bands 2025/26

Scotland has its own income tax rates, with six bands compared to England's three. Scottish taxpayers pay less tax on lower incomes but slightly more at higher incomes.

Band	Threshold	Rate
Starter Rate	£12,571 – £15,397	19%
Basic Rate	£15,397 – £27,491	20%
Intermediate	£27,491 – £43,662	21%
Higher Rate	£43,662 – £75,000	42%
Advanced Rate	£75,000 – £125,140	45%
Top Rate	Over £125,140	48%

❓ Frequently Asked Questions

What is the Personal Allowance and how does it work?: The Personal Allowance (£12,570 for 2025/26) is the amount you can earn each year completely tax-free. It applies before any Income Tax is calculated. If you earn over £100,000, your allowance is reduced by £1 for every £2 above that threshold — disappearing entirely at £125,140.
What is a tax code and why does it matter?: Your tax code tells your employer or pension provider how much tax-free income you are entitled to. The most common code is 1257L, which gives you the standard £12,570 Personal Allowance. Emergency codes or codes ending in 0T mean you get no allowance and pay tax from the first pound. You can find your tax code on a payslip or by logging into HMRC online.
How does Salary Sacrifice affect my take-home pay?: Salary Sacrifice lets you swap part of your salary for a non-cash benefit (usually pension contributions). Because your gross salary is reduced, you pay less Income Tax and NI — making this one of the most tax-efficient ways to save for retirement. For example, a £40,000 earner putting 5% into a salary sacrifice pension saves roughly £300/year in NI alone compared to a standard pension deduction.
When do I need to repay a Student Loan?: You only repay once your income exceeds your plan's threshold. For 2025/26: Plan 1 — £26,065/year; Plan 2 — £28,470/year; Plan 4 (Scotland) — £32,745/year; Plan 5 — £25,000/year. You repay 9% of income above the threshold. Postgraduate loans have a 6% rate above £21,000.
What is the 60% tax trap?: If your income falls between £100,000 and £125,140, you lose £1 of Personal Allowance for every £2 earned above £100,000. Combined with the 40% Higher Rate tax, this creates an effective marginal rate of 60% on earnings in this range. Common solutions include making pension contributions to bring taxable income below £100,000.
How is the effective tax rate different from the marginal rate?: The marginal rate is the rate applied to your last pound of earnings (e.g. 40%). The effective rate is your total tax as a percentage of your gross salary — always lower because lower bands are taxed at lower rates. A £60,000 earner might have a 40% marginal rate but only a 24% effective rate, since most of their income is taxed at 20% or 0%.

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