UK Tax Brackets 2025/26: Income Tax Bands & Rates Explained

Understanding UK tax brackets is essential for anyone earning income, whether you’re employed, self-employed, or running a limited company.

In this guide, we break down the UK tax brackets for the 2025/26 tax year, including income thresholds, tax rates, and how much tax you’ll actually pay.

We’ll also explain how tax bands work in real terms, so you can better plan your income and avoid unexpected tax bills.

UK Tax Brackets 2025/26

For the 2025/26 tax year, income tax in England is divided into the following bands:

These thresholds are currently frozen, meaning more people may move into higher tax bands over time.

What Is the Personal Allowance?

The Personal Allowance is the amount you can earn before paying any income tax.

For 2025/26:

• Standard allowance: £12,570

However:

• If you earn over £100,000, your allowance is gradually reduced
• It is fully removed at £125,140

This creates an effective 60% tax trap between £100k–£125k

How UK Tax Brackets Actually Work

A common misconception is that moving into a higher tax bracket means all your income is taxed at that rate.

This is incorrect.

You only pay the higher rate on the portion above the threshold.

Example:

If you earn £60,000:

• First £12,570 → 0%
• Next £37,700 → 20%
• Remaining £9,730 → 40%

This is why your effective tax rate is lower than you might think.

UK Tax Brackets Example (Real Calculation)

Let’s break it down:

Income: £40,000

• £12,570 → 0% = £0
• £27,430 → 20% = £5,486

Total tax = £5,486

How Tax Brackets Affect Different People

Employees (PAYE)

Tax is automatically deducted via your tax code.

If your tax code is wrong, you may overpay or underpay tax.

Self-Employed

You calculate and pay tax through Self Assessment.

Use a self-employed tax calculator to estimate your bill.

Company Directors

Income may come from:

• Salary
• Dividends

Tax planning becomes more important here.

Why Tax Brackets Matter in 2025/26

With thresholds frozen:

• More people will drift into higher tax bands
• Real tax burden increases (known as fiscal drag)

This makes planning more important than ever.

How to Reduce Your Tax Bill

Legal ways to reduce tax include:

• Pension contributions
• Claiming allowable expenses
• Using dividend allowances
• Splitting income efficiently

Use Our UK Tax Calculators

To get a more accurate picture of your tax:

• Salary vs Dividend Calculator
• Self-Employed Tax Calculator
• Capital Gains Tax Calculator

These tools help you estimate your real take-home income.