Net take-home
£3,302
£39,624/year after tax
Income tax£8,432
National Insurance£3,144
Student loan£0
Pension contribution£2,750
Personal Allowance, Income Tax bands, Class 1 NI, and Student Loan Plans 1, 2, 4, 5 + PGL — the 2025-26 rules in one calculator.
UK payroll runs through PAYE — Pay As You Earn. Each month, the employer applies your tax code to gross pay, deducts Income Tax (band-by-band against your annual Personal Allowance), Class 1 National Insurance (8% / 2% bands), then any Student Loan and pension contributions. Pension treatment varies by scheme type — salary sacrifice is materially more tax-efficient than RAS. The Scottish bands replace England/Wales/NI bands for Scottish-resident employees.
Income Tax — band-stack against £12,570 Personal AllowanceNI — 8% on £12,570–£50,270, 2% abovePA taper — lose £1 of allowance per £2 over £100,000| Band | Range | Rate |
|---|---|---|
| Personal Allowance | £0 – £12,570 | 0% |
| Basic Rate | £12,571 – £50,270 | 20% |
| Higher Rate | £50,271 – £125,140 | 40% |
| Additional Rate | over £125,140 | 45% |
| PA taper | £100,000 – £125,140 | +effective 60% / 62% with NI |
Personal Allowance has been frozen at £12,570 since 2022-23. The Autumn Statement 2024 extended the freeze to April 2028 — fiscal drag pulls more earners into Higher Rate each year as wages rise.
| Band | Range | Rate |
|---|---|---|
| Personal Allowance | £0 – £12,570 | 0% |
| Starter | £12,571 – £14,876 | 19% |
| Basic | £14,877 – £26,561 | 20% |
| Intermediate | £26,562 – £43,662 | 21% |
| Higher | £43,663 – £75,000 | 42% |
| Advanced | £75,001 – £125,140 | 45% |
| Top | over £125,140 | 48% |
Scottish bands apply to non-savings, non-dividend income only. Savings interest and dividends are taxed at UK rates regardless of residence. NI is UK-wide. A £75,000 Scottish resident pays ~£3,000-£4,000 more in income tax than an equivalent resident in England.
Each £1 above £100,000 costs you 40p Higher Rate tax PLUS the loss of 50p of Personal Allowance, which itself becomes taxed at 40% (= 20p more). So 40p + 20p = 60p of every £1 lost to HMRC. Add 2% NI and the marginal rate is 62%. The fix: pension salary sacrifice down to under £100,000. A £25,140 sacrifice from £125,140 gross saves £15,084 in tax — the government effectively pays 60% of the retirement contribution.
Mortgage lenders use gross salary AFTER salary sacrifice. £55,000 gross with £5,000 sacrifice = £50,000 reference salary for affordability. On a 4.5x income multiplier, that's £22,500 less borrowing capacity. Worth knowing before applying. Some lenders look at gross-pre-sacrifice (notably Halifax, Nationwide on certain products) — confirm with your broker.
If one spouse earns under £12,570 and the other is a Basic Rate taxpayer (under £50,270), the lower earner can transfer £1,260 of unused Personal Allowance — saving the couple £252/year. Apply once via gov.uk; auto-renews. Doesn't apply if either is Higher Rate. Unmarried cohabiting couples not eligible.
Sources: HMRC Income Tax rates and allowances 2026-27 (gov.uk); HMRC PAYE manual; HMRC Class 1 NI thresholds; Autumn Statement 2024 (HM Treasury); Scottish Budget 2025-26; Student Loans Company repayment thresholds; FCA workplace pension guidance.
£12,570, the same as 2025-26 — frozen since 2022-23 and the Autumn Statement 2024 extended the freeze through April 2028. The first £12,570 of income is tax-free for most earners. Above £100,000, you lose £1 of Personal Allowance for every £2 of income, fully tapering by £125,140 — this creates the famous '60% trap' band.
Between £100,000 and £125,140, your effective marginal rate is 60% (62% with NI). Each £1 above £100,000 costs 40p Higher Rate tax PLUS loss of 50p of Personal Allowance (taxed at 40% = 20p more) = 60p. The fix: salary sacrifice into a pension to bring taxable income under £100,000. A £25,140 contribution saves £15,084 in tax — the government effectively pays 60%.
£0–£12,570 = 0% (PA); £12,571–£50,270 = 20% Basic; £50,271–£125,140 = 40% Higher; over £125,140 = 45% Additional. Additional Rate threshold was lowered from £150,000 to £125,140 in April 2023. Scotland operates separate bands with five tiers — see the Scottish band table on this page.
For 2026-27: 8% on earnings between £12,570 and £50,270, then 2% above. The 8% rate has been in place since April 2024. Self-employed pay Class 4 NI at 6% on profits between £12,570 and £50,270, then 2% above. Class 2 NI was abolished in April 2024 (previously £3.45/week).
Scotland has six tiers vs three in rUK: 19% Starter, 20% Basic, 21% Intermediate, 42% Higher (from £43,663), 45% Advanced (from £75,001), 48% Top (over £125,140). Personal Allowance and NI are UK-wide. A £75,000 Scottish earner pays ~£3,000-£4,000 more in income tax than an equivalent in England.
Salary sacrifice reduces your contractual gross salary before tax AND NI. £5,000 sacrificed saves £1,000 income tax (basic) plus £400 NI = £1,400, so the £5,000 contribution costs only £3,600 net. Higher-rate sacrifices save 48%; the 60%-trap band saves 62%. Many employers also pass on their NI savings (15%) as additional contribution. Reduces gross for mortgage qualification — confirm with your lender.
Salary sacrifice: gross salary reduced — saves income tax AND NI. Most efficient. Net pay arrangement: deducted from gross before income tax — saves income tax only. Relief at Source (RAS): from net pay, HMRC adds 20% basic-rate top-up automatically. Higher-rate taxpayers must reclaim the extra 20-25% via Self Assessment. RAS common in personal pensions/SIPPs; SS and net-pay are workplace schemes.
By when and where you started: Plan 1 — England/Wales pre-Sep 2012 (or NI/Scotland pre-2024), 9% over £26,065. Plan 2 — E&W Sep 2012-July 2023, 9% over £28,470. Plan 4 — Scotland from 2021, 9% over £32,745. Plan 5 — England from Aug 2023, 9% over £25,000, 40-yr term. PGL — Postgrad, 6% over £21,000. Can be on multiple plans. Check via Student Loans Company online account.
If one spouse earns under £12,570 and the other is Basic Rate (under £50,270), the lower earner can transfer £1,260 of unused PA to the higher earner — saving £252/year (£1,260 × 20%). Apply via gov.uk, auto-renews. Doesn't apply if either is Higher or Additional Rate. Unmarried cohabiting couples not eligible.
Five layers: (1) Income Tax via PAYE; (2) Class 1 NI 8%/2%; (3) Student Loan if applicable; (4) workplace pension; (5) other voluntary (cycle-to-work, childcare). On £55,000 with 5% salary sacrifice and no student loan, take-home is roughly £3,400/month vs gross-÷-12 of £4,583. PAYE spreads allowances evenly across 12 months, so deductions are smooth.