How to Calculate Income Tax 2025/26: Complete UK Guide

Understanding how UK income tax works is essential for every taxpayer — whether you are employed, self-employed, or receiving pension income. The 2025/26 tax year runs from 6 April 2025 to 5 April 2026, and brings a number of important changes that affect how much tax you pay. In this comprehensive guide, we walk through every band, allowance, and trap you need to know about, complete with worked examples at different income levels.

The Personal Allowance 2025/26

The Personal Allowance for 2025/26 remains frozen at £12,570. This is the amount of income you can earn before paying any income tax at all. The Personal Allowance has been frozen at this level since 2021/22, and the government has confirmed it will remain frozen until at least April 2028 — a policy known as “fiscal drag” that effectively increases the tax burden as wages rise with inflation.

Not everyone receives the full Personal Allowance. If your adjusted net income exceeds £100,000, your Personal Allowance is reduced by £1 for every £2 of income above this threshold. This means the Personal Allowance is completely eliminated once income reaches £125,140. This creates the so-called “60% trap” — a band of income between £100,000 and £125,140 where the effective marginal tax rate hits 60%.

Blind Person's Allowance

If you are registered blind (or severely sight impaired), you are entitled to an additional Blind Person's Allowance of £3,070 for 2025/26 on top of the standard Personal Allowance. If you cannot use all of the allowance yourself, you can transfer the surplus to your spouse or civil partner.

Income Tax Bands and Rates

Once your income exceeds the Personal Allowance, it is taxed in bands. For English, Welsh, and Northern Irish taxpayers, the rates for 2025/26 are:

Important: these bands apply to non-savings, non-dividend income. Savings income and dividend income have their own rates and allowances, which we cover separately in our savings and dividend tax guides.

Scottish Income Tax Rates 2025/26

If you are a Scottish taxpayer (determined by where you live, not where you work), you pay Scottish Income Tax rates on your non-savings, non-dividend income. Scotland has a more progressive system with six bands:

Scottish taxpayers therefore pay more tax than their English counterparts at most income levels above £28,000. At the top end, the Scottish top rate of 48% is 3 percentage points higher than the UK additional rate of 45%.

The 60% Tax Trap Explained

The 60% trap is one of the most misunderstood aspects of UK taxation. It occurs because the Personal Allowance is withdrawn at a rate of £1 for every £2 of income above £100,000. Combined with the 40% higher rate tax, this creates an effective marginal rate of 60% on income between £100,000 and £125,140.

Here's how it works: suppose you earn £110,000. Your Personal Allowance is reduced by (£110,000 − £100,000) ÷ 2 = £5,000, leaving you with a Personal Allowance of only £7,570. On every additional £1 you earn in this band, you lose 50p of Personal Allowance, which means that 50p is now taxed at 40% — an extra 20p of tax on top of the 40% you already pay on the £1. Total: 60p in tax on every £1.

Common strategies to mitigate the 60% trap include making pension contributions (which reduce adjusted net income), Gift Aid donations (which extend the basic rate band), and salary sacrifice arrangements.

Marriage Allowance

The Marriage Allowance allows a spouse or civil partner who earns less than the Personal Allowance (£12,570) to transfer up to £1,260 of their unused allowance to their partner — provided the recipient is a basic rate taxpayer. This can reduce the couple's tax bill by up to £252 per year (£1,260 × 20%).

To qualify: one partner must have income below £12,570, and the other must be a basic rate taxpayer (income below £50,270). You cannot claim Marriage Allowance if either partner pays higher or additional rate tax. The claim can be backdated up to 4 previous tax years.

Worked Examples

Let's calculate the income tax liability for four different salary levels to illustrate how the system works in practice. All examples assume English/Welsh/NI rates, employment income only, and no other allowances or deductions.

Example 1: Salary of £30,000

Gross Income:                  £30,000
Less Personal Allowance:      -£12,570
Taxable Income:                £17,430

Basic Rate (20%):  £17,430 × 20%  =  £3,486.00

Total Income Tax:                     £3,486.00
Effective Tax Rate:                      11.6%

Example 2: Salary of £50,000

Gross Income:                  £50,000
Less Personal Allowance:      -£12,570
Taxable Income:                £37,430

Basic Rate (20%):  £37,430 × 20%  =  £7,486.00

Total Income Tax:                     £7,486.00
Effective Tax Rate:                      15.0%

Example 3: Salary of £85,000

Gross Income:                  £85,000
Less Personal Allowance:      -£12,570
Taxable Income:                £72,430

Basic Rate (20%):  £37,700 × 20%  =  £7,540.00
Higher Rate (40%): £34,730 × 40%  = £13,892.00

Total Income Tax:                    £21,432.00
Effective Tax Rate:                      25.2%

Example 4: Salary of £120,000

Gross Income:                 £120,000
Personal Allowance Reduction:
  (£120,000 - £100,000) / 2 = £10,000
  Reduced PA: £12,570 - £10,000 = £2,570

Less Personal Allowance:       -£2,570
Taxable Income:               £117,430

Basic Rate (20%):  £37,700 × 20%  =  £7,540.00
Higher Rate (40%): £79,730 × 40%  = £31,892.00

Total Income Tax:                    £39,432.00
Effective Tax Rate:                      32.9%

Notice how the effective tax rate jumps significantly between £85,000 and £120,000 due to the Personal Allowance taper. A taxpayer earning £120,000 has an effective rate of 32.9%, compared to 25.2% for someone earning £85,000.

National Insurance Contributions

In addition to income tax, employed individuals pay Class 1 National Insurance Contributions (NICs). For 2025/26, the employee NIC rates are:

Self-employed individuals pay Class 4 NICs at 6% on profits between £12,570 and £50,270, and 2% above £50,270. They also pay Class 2 NICs of £3.45 per week if profits exceed £12,570.

Tax Planning Tips

• Maximise pension contributions to reduce taxable income — particularly effective in the 60% trap band
• Use ISAs to shelter savings and investment income from tax entirely
• Claim Marriage Allowance if eligible — worth up to £252 per year and can be backdated
• Consider salary sacrifice arrangements for childcare, cycle-to-work, or additional pension contributions
• Spread capital gains across tax years to maximise the annual exempt amount
• Keep records of all allowable expenses if self-employed to reduce taxable profits
• Review your tax code annually to ensure HMRC has the correct information