This guide explains the main UK tax rates and thresholds for the 2025/26 tax year, including Income Tax, the Personal Allowance, National Insurance, student loan repayment thresholds and VAT.
The 2025/26 tax year runs from 6 April 2025 to 5 April 2026. These are the figures used by SalaryHub when estimating take-home pay, tax deductions and salary calculations for the selected tax year.
Understanding the 2025/26 UK tax bands and thresholds can help employees, self-employed workers and business owners better estimate their take-home pay, compare salary offers, understand payslips and plan around important tax thresholds.
2025/26 Tax Year Summary
- The standard Personal Allowance is £12,570.
- The default tax code is 1257L.
- The basic rate Income Tax band applies at 20%.
- The higher rate applies at 40%.
- The additional rate applies at 45%.
- Employee National Insurance is charged at 8%.
- Self-employed Class 4 National Insurance is charged at 6%.
- The standard VAT rate is 20%.
Income Tax Rates and Bands for 2025/26
Income Tax is one of the largest deductions affecting take-home pay in the UK. For most employees, Income Tax is deducted automatically through PAYE before salary is paid into a bank account. The amount deducted depends on your taxable income, tax code and the Income Tax bands for the selected tax year.
The 2025/26 tax year continues to use the England, Wales and Northern Ireland Income Tax structure reflected in SalaryHub’s calculators and tax year configuration.
| Income Tax band | Taxable income | Rate |
|---|---|---|
| Basic Rate | £0 to £37,700 | 20% |
| Higher Rate | £37,700 to £125,140 | 40% |
| Additional Rate | £125,140 and above | 45% |
UK Income Tax uses a progressive system. Different portions of taxable income are taxed at different rates. Moving into the higher rate tax band does not mean all income is taxed at 40%. Only the portion above the threshold is taxed at the higher rate.
This is an important point when comparing salaries, bonuses and pay rises. Many employees assume crossing a threshold results in most of their income being lost to tax, but the UK system does not work that way.
Personal Allowance for 2025/26
The standard Personal Allowance for the 2025/26 tax year is £12,570.
For most people, this means the first £12,570 of annual income can be received before Income Tax becomes payable.
Employees with the standard tax code 1257L are usually receiving the standard Personal Allowance through PAYE.
The Personal Allowance starts to reduce once adjusted net income exceeds £100,000. The allowance is reduced by £1 for every £2 of income above this threshold.
This taper creates one of the most important planning areas in the UK tax system. Between £100,000 and the point where the allowance is fully removed, the effective marginal tax rate can become extremely high.
This is one reason why pension contributions and salary sacrifice are often discussed alongside higher incomes. Reducing adjusted net income may help preserve some or all of the Personal Allowance.
Higher Rate and Additional Rate Tax
The higher rate tax band remains one of the most important thresholds for UK employees. Once taxable income moves beyond the basic rate band, additional income becomes subject to higher rate Income Tax.
Many salary comparisons, bonus discussions and pension contribution calculations focus on the higher rate threshold because deductions can increase significantly once income exceeds this level.
The additional rate band applies to even higher incomes and results in a further increase in Income Tax on earnings above the threshold.
In practice, higher earners often pay:
- Higher rate Income Tax
- Employee National Insurance
- Student loan repayments
- Pension contributions
This combination means the gap between gross salary and net pay can become substantial at higher income levels.
Employee National Insurance Thresholds
National Insurance is separate from Income Tax and has its own thresholds and rates. For employees, National Insurance is usually deducted automatically through payroll.
| Employee NI item | 2025/26 value |
|---|---|
| Primary threshold | £12,570 |
| Upper earnings limit | £50,270 |
| Main employee NI rate | 8% |
| Additional employee NI rate | 2% |
For 2025/26, employee National Insurance is charged at 8% between the primary threshold and upper earnings limit.
Earnings above the upper earnings limit are charged at the reduced additional rate of 2%.
National Insurance can significantly affect take-home pay calculations, especially for employees earning within the main NI band.
Self-Employed National Insurance Thresholds
Self-employed workers usually pay Class 4 National Insurance based on business profits rather than employment salary.
| Self-employed NI item | 2025/26 value |
|---|---|
| Class 4 lower profits limit | £12,570 |
| Class 4 upper profits limit | £50,270 |
| Class 4 main rate | 6% |
| Class 4 additional rate | 2% |
For many self-employed workers, Class 4 National Insurance is one of the main deductions affecting take-home income estimates.
Understanding these thresholds is important when comparing employed and self-employed income, especially when considering contract work or freelance roles.
Student Loan Repayment Thresholds for 2025/26
Student loan deductions can substantially affect net pay, especially for graduates earning above repayment thresholds.
Repayments are based on income above the threshold for the relevant repayment plan. They are not calculated on the total balance in the same way as a normal loan.
| Student loan plan | Annual threshold | Repayment rate |
|---|---|---|
| Plan 1 | £26,065 | 9% |
| Plan 2 | £28,470 | 9% |
| Plan 3 / Postgraduate Loan | £21,000 | 6% |
| Plan 4 | £32,745 | 9% |
| Postgraduate Loan | £21,000 | 6% |
Most undergraduate student loans use a repayment rate of 9% above the relevant threshold, while Postgraduate Loans use a rate of 6%.
Someone earning below the threshold for their plan generally does not make repayments. Once earnings move above the threshold, repayments begin automatically through payroll for most employees.
Student loan deductions can sometimes surprise graduates because they reduce net pay even though they are technically not classed as a tax.
VAT Thresholds for 2025/26
VAT is mainly relevant to businesses and self-employed workers rather than employees, but it remains one of the most important UK tax thresholds overall.
| VAT item | 2025/26 value |
|---|---|
| VAT registration threshold | £90,000 |
| VAT deregistration threshold | £88,000 |
| Standard VAT rate | 20% |
Businesses with taxable turnover above the VAT registration threshold may need to register for VAT and charge VAT on eligible sales.
How These Thresholds Affect Take-Home Pay
Gross salary and take-home pay are very different figures. The amount actually received after deductions depends on multiple factors including:
- Income Tax bands
- National Insurance
- Pension contributions
- Student loan repayments
- Tax code
- Employment type
Two people earning the same salary may therefore receive different net pay.
For example, someone with student loan deductions and workplace pension contributions will often take home less than another employee on the same gross salary without those deductions.
Tax year selection also matters because thresholds can change between years. The same salary may produce different take-home pay in different tax years.
Frozen Tax Thresholds and Fiscal Drag
One of the major UK tax discussions surrounding the 2025/26 tax year is fiscal drag.
Fiscal drag happens when tax thresholds remain frozen while wages gradually rise. Over time, more income becomes taxable or moves into higher tax bands even if real purchasing power has not increased significantly.
This can result in:
- More workers entering higher rate tax bands
- Higher Income Tax deductions
- Reduced growth in take-home pay
- Increased impact from student loan repayments
Even modest pay rises can therefore produce smaller increases in net pay than employees expect.
This is one reason why salary calculators and take-home pay comparisons have become increasingly popular in recent years.
Tax Code 1257L in 2025/26
The standard tax code in this tax year configuration is 1257L.
For many employees, 1257L means the standard Personal Allowance is being applied through PAYE.
However, many people use different tax codes due to:
- Company benefits
- Multiple jobs
- Pension income
- Underpaid tax from previous years
- Marriage Allowance adjustments
If your tax code is incorrect, your payslip deductions may also be incorrect.
Useful SalaryHub Calculators
- Salary Calculator 2025/26
- Income Tax Calculator 2025/26
- Student Loan Calculator 2025/26
- Bonus Pay Calculator 2025/26
- Take-Home Pay Over the Years Calculator
Estimate Your 2025/26 Take-Home Pay
Use SalaryHub’s calculators to estimate Income Tax, National Insurance, student loan deductions and net pay using the 2025/26 tax year thresholds.
Use the Salary CalculatorFrequently Asked Questions
What is the Personal Allowance for 2025/26?
The standard Personal Allowance for 2025/26 is £12,570.
What is the basic rate tax band for 2025/26?
The basic rate Income Tax band applies at 20%.
What National Insurance rate do employees pay in 2025/26?
Employees pay National Insurance at 8% between the main thresholds.
What is the Plan 2 student loan threshold for 2025/26?
The Plan 2 threshold for 2025/26 is £28,470.
Why does take-home pay differ from gross salary?
Gross salary does not include deductions such as Income Tax, National Insurance, pensions and student loan repayments.
Does SalaryHub use current tax year thresholds?
Yes. SalaryHub calculators use the selected tax year configuration when estimating deductions and take-home pay.
Final Thoughts
Understanding the 2025/26 UK tax rates and thresholds can make it easier to estimate net pay, compare job offers, understand payslips and plan around important tax thresholds.
While gross salary figures are often the headline number, deductions such as Income Tax, National Insurance, pension contributions and student loan repayments can significantly change what actually reaches your bank account.
SalaryHub’s calculators and guides are designed to make these deductions easier to understand by using the latest available UK tax rates and thresholds for the selected tax year.