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HM Revenue & Customs defines it this way: “The Personal Allowance is the amount of income a person can get before they pay tax.” The current rates, allowances and category rules are set out in HMRC’s 2026/27 guidance.
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What an income-tax band actually means
A tax band is a range of taxable income with a specified marginal rate. Your marginal rate is the rate on the next pound you earn; it is not the percentage charged on every pound of your income. Your overall or average rate is the income tax you owe divided by your total income, after allowances and other applicable rules.
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The calculation normally starts with income such as salary, pension and property income. The Personal Allowance is set against eligible income first. The remaining taxable amount is then divided between bands. If part of your income reaches a higher band, only that part moves to the higher rate; the slices below it keep their original treatment.
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The figures below describe 2026/27 rates. The rates page covers several years, so check that a table is labelled 2026/27 before using it.
How income tax is calculated
- Identify your residence and income categories. England, Wales and Northern Ireland use one main non-savings, non-dividend structure. Scotland has its own rates for non-savings, non-dividend income. Savings interest and dividends have separate allowances, rates and ordering rules.
- Add taxable income. Use the relevant income for the tax year, not your take-home pay. Take-home pay has already had tax, National Insurance and possibly other deductions removed.
- Work out your Personal Allowance. The standard allowance is £12,570, unless eligibility rules or the adjusted-net-income taper reduce it.
- Subtract the allowance from income in the applicable order. The amount left is allocated through the bands. If the allowance has been tapered to zero, all eligible income starts in a taxed band.
- Apply each marginal rate to its slice. Multiply the amount in each band by that band’s percentage and add the results.
- Keep other deductions separate. National Insurance, student-loan repayments, benefits withdrawal and employer payroll adjustments are not income-tax bands and can change take-home pay without changing your income-tax calculation.
For a personal calculation, use the current HMRC rates and allowances tables and the rules for your income category.
England, Wales and Northern Ireland: 2026/27 main bands
The following table applies to ordinary non-savings, non-dividend income, such as employment pay, most pensions and property income, for taxpayers in England, Wales and Northern Ireland. The gross-income ranges assume the full £12,570 Personal Allowance and no other adjustments. The taxable-slice column shows the amount actually charged at the stated rate.
| Gross income range assuming a full allowance | Taxable slice in that range | Rate |
|---|---|---|
| Up to £12,570 | Covered by the Personal Allowance | 0% |
| £12,571 to £50,270 | Up to £37,700 | 20% basic rate |
| £50,271 to £125,140 | Next £74,870 | 40% higher rate |
| Above £125,140 | Amount above the higher-rate limit | 45% additional rate |
The £50,270 and £125,140 boundaries are often quoted as income-tax thresholds. They assume the standard allowance. If your allowance is reduced, your taxable income and the point at which tax starts can be different.
Worked example: £60,000 salary
Assume an England, Wales or Northern Ireland taxpayer has £60,000 of salary in 2026/27, qualifies for the full Personal Allowance and has no other income or reliefs. This is a mechanical illustration, not a personalised calculation.
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- The first £12,570 is covered by the allowance and taxed at 0%.
- The next £37,700 (from £12,571 to £50,270) is taxed at 20%: £37,700 × 20% = £7,540.
- The remaining £9,730 (£60,000 − £50,270) is taxed at 40%: £9,730 × 40% = £3,892.
- Total income tax on these assumptions is £11,432.
The 40% rate applies to the final £9,730, not to the full £60,000. The arithmetic also shows why the average rate is lower than the marginal rate: £11,432 is about 19.1% of £60,000 before considering National Insurance or any other deductions.
How income tax bands differ in Scotland
Scotland sets different rates for non-savings, non-dividend income. The table below is for 2026/27 taxable income after allowances. Do not use it for savings interest or dividends without checking the relevant HMRC category rules.
| Taxable non-savings, non-dividend income after allowances | Scottish rate |
|---|---|
| Up to £3,967 | 19% starter rate |
| £3,968 to £16,956 | 20% basic rate |
| £16,957 to £31,092 | 21% intermediate rate |
| £31,093 to £62,430 | 42% higher rate |
| £62,431 to £125,140 | 45% advanced rate |
| Above £125,140 | 48% top rate |
Scottish taxpayers can still have a Personal Allowance, but the allowance and any taper must be applied before placing taxable non-savings, non-dividend income into these bands. Your Scottish residence status and the type of income therefore matter; a Scottish table is not a universal replacement for the England, Wales and Northern Ireland table.
How the Personal Allowance works
For 2026/27 the standard Personal Allowance is £12,570. It is an allowance, not a separate tax band: eligible income up to that amount is not charged to income tax. The allowance can be transferred or restricted in specific circumstances, so the standard figure is not guaranteed for every person.
The high-income taper
When your adjusted net income exceeds £100,000, the allowance is reduced by £1 for every £2 above that threshold. At adjusted net income of £125,140, the standard allowance has been reduced to zero. These are 2026/27 figures.
Adjusted net income is not automatically your salary and is not your take-home pay. HMRC starts with total taxable income before Personal Allowances and then subtracts specified reliefs, including eligible pension contributions and the grossed-up amount of qualifying Gift Aid. Additions or deductions can depend on your circumstances. See HMRC’s adjusted-net-income guidance for the calculation.
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For an England, Wales or Northern Ireland taxpayer whose income is otherwise in the 40% band, each extra £1 in the taper range can reduce the allowance by 50p. That 50p becomes taxable at 40%, creating another 20p of tax, while the original £1 is also taxed at 40p. The resulting 60p of income tax per extra pound is an effective marginal rate over that range.
This is not a statutory 60% band. It is the combined effect of the 40% rate and the £1-for-£2 allowance withdrawal, before National Insurance or other interactions. Scotland’s headline rates differ, so the same arithmetic should not be applied there without checking the applicable Scottish band.
Savings interest and dividends use separate rules
Do not put every type of income into the salary table. HMRC publishes separate tables and ordering rules for savings and dividends.
Savings
For 2026/27 HMRC lists a starting rate for savings of up to £5,000. It is conditional: other income can reduce or eliminate the amount available, so it is not a promise that every taxpayer can receive £5,000 of interest tax-free. The rate and the way savings income is stacked with other income depend on your circumstances; check the current HMRC category guidance rather than applying the salary example.
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Dividends
The 2026/27 dividend allowance is £500. Dividend rates for amounts above that allowance are 10.75% for a basic-rate band, 35.75% for a higher-rate band and 39.35% for an additional-rate band. The ordinary and upper rates take effect for 2026/27 under the Finance Act 2026 provisions.
The dividend allowance is a 0% allowance within the dividend rules, not an extra £500 added to your Personal Allowance. Dividends can use up the available basic, higher or additional-rate band after other income is considered, so the same dividend can face different rates for different people.
Marginal rate, average rate and a pay rise
Your marginal rate answers, “How much income tax applies to the next pound?” Your average rate answers, “What proportion of all my income is tax?” The two are normally different because the Personal Allowance and lower bands shelter or tax earlier slices at lower rates.
A threshold is not a cliff edge. If a pay rise takes you from £50,270 to £50,271 in England, Wales or Northern Ireland, the extra pound is in the 40% slice; the earlier £37,700 basic-rate slice remains taxed at 20%. The allowance taper, dividend ordering and other charges can produce more complicated effects, but crossing an ordinary band does not retrospectively re-tax previous income.
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- Confirm the tax year: 2026/27 runs from 6 April 2026 to 5 April 2027.
- Confirm your UK nation for the income concerned, especially whether Scottish rates apply.
- Separate salary, pension and property income from savings interest and dividends.
- Estimate adjusted net income, including relevant pension contributions and Gift Aid reliefs, before deciding whether the allowance taper applies.
- Apply the Personal Allowance once, then allocate each remaining slice to the correct band.
- For an additional amount, identify the band that the next slice enters; that is the starting point for its marginal income-tax rate.
- Keep National Insurance, student-loan deductions, benefits withdrawal and workplace payroll adjustments outside the income-tax-band arithmetic.
- Use HMRC’s current tables when a result depends on savings, dividends, Scottish income, a tapered allowance or a relief.
Common mistakes and how to avoid them
Applying the highest reached rate to all income
Replace that shortcut with a slice-by-slice calculation. A higher-rate taxpayer still has income taxed through the allowance and basic-rate bands, unless a rule such as the allowance taper changes the position.
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Confusing gross income with taxable income
The familiar £50,270 and £125,140 figures assume a full £12,570 allowance. Scottish tables are commonly expressed as taxable income after allowances. Label the basis of every figure before comparing it.
Using salary bands for dividends or interest
Check the separate HMRC tables. The £5,000 savings starting rate is conditional, and the £500 dividend allowance and 2026/27 dividend rates follow different rules.
Treating adjusted net income as take-home pay
Adjusted net income is a tax-calculation measure before Personal Allowances, adjusted by specified reliefs. It is not the amount deposited in your bank account.
Mixing income tax with other payroll deductions
National Insurance and student-loan repayments may reduce your payslip even when your income-tax band has not changed. They require separate calculations.
Where to verify the figures
HMRC’s Income Tax rates and allowances page, updated for the 2026/27 year, is the controlling source for current thresholds, Scottish distinctions, savings and dividend tables. For the allowance taper, use HMRC’s adjusted net income guidance. General consumer explanations are also available from MoneyHelper, but current calculations should follow HMRC’s published figures and your own facts.
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