This guide explains the main UK tax rates and thresholds for the 2026/27 tax year, including Income Tax, the Personal Allowance, National Insurance, student loan repayment thresholds and VAT.
The 2026/27 tax year runs from 6 April 2026 to 5 April 2027. These are the figures used by SalaryHub when estimating take-home pay, tax deductions and salary calculations for the selected tax year.
2026/27 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% between the main thresholds.
- The standard VAT rate is 20%.
Income Tax Rates and Bands for 2026/27
Income Tax is charged on taxable income after your Personal Allowance has been applied. For many employees, this is handled automatically through PAYE. Your employer uses your tax code to estimate how much tax-free income you are entitled to during the tax year, then deducts Income Tax from your wages before you are paid.
The figures below apply to the England, Wales and Northern Ireland model used by SalaryHub. Scotland has different Income Tax bands and rates for non-savings, non-dividend income, so Scottish taxpayers may see different Income Tax results.
| Band | Taxable income band | Rate |
|---|---|---|
| Basic Rate | £0 to £37,700 | 20% |
| Higher Rate | £37,700 to £125,140 | 40% |
| Additional Rate | £125,140 and above | 45% |
Personal Allowance for 2026/27
The standard Personal Allowance for 2026/27 is £12,570. This is the amount of income most people can receive before paying Income Tax. If you have a standard tax code of 1257L, it usually means your tax-free allowance is being spread across the tax year through PAYE.
The Personal Allowance can be reduced if your income is above £100,000. For every £2 of adjusted net income above this level, the allowance is reduced by £1. This means higher earners can lose part or all of their tax-free allowance.
This taper can create a very high effective tax rate between £100,000 and the point where the Personal Allowance has been fully removed. That is why pension contributions, salary sacrifice and Gift Aid can sometimes have a larger tax impact for people in this income range.
How the 2026/27 Income Tax Bands Work
Income Tax bands are progressive. This means you do not pay one single tax rate on all of your income. Instead, different slices of income are taxed at different rates. For example, income within the basic rate band is taxed at the basic rate, while only the income above the higher rate threshold is taxed at the higher rate.
A common misunderstanding is that moving into the higher rate band means all income is taxed at 40%. That is not how UK Income Tax works. Only the part of your taxable income that falls inside the higher rate band is taxed at the higher rate.
This is why a salary calculator can be helpful. The headline salary is only the starting point. Your actual take-home pay depends on your Personal Allowance, tax code, pension contributions, National Insurance, student loans and other deductions.
National Insurance Thresholds for Employees
Employee National Insurance is another major deduction from salary. It is separate from Income Tax and is calculated using its own thresholds and rates. For employees, National Insurance is usually deducted automatically through payroll.
| Employee NI item | 2026/27 value |
|---|---|
| Primary threshold | £12,570 |
| Upper earnings limit | £50,270 |
| Main employee NI rate | 8% |
| Additional employee NI rate | 2% |
For the 2026/27 tax year, employee National Insurance is charged at 8% between £12,570 and £50,270. Earnings above the upper earnings limit are charged at the additional rate of 2%.
Self-Employed National Insurance Thresholds
Self-employed people usually calculate tax based on business profits rather than employment salary. For many self-employed workers, Class 4 National Insurance is the main National Insurance deduction considered in take-home pay estimates.
| Self-employed NI item | 2026/27 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 2026/27, Class 4 National Insurance is charged at 6% between the lower and upper profits limits, then at 2% above the upper profits limit.
Student Loan Repayment Thresholds for 2026/27
Student loan repayments are based on your income and repayment plan. They are not calculated on your total loan balance in the same way as a normal personal loan. Instead, once your income is above the relevant annual threshold, repayments are calculated as a percentage of the income above that threshold.
| Student loan plan | Annual threshold | Repayment rate |
|---|---|---|
| Plan 1 | £26,900 | 9% |
| Plan 2 | £29,385 | 9% |
| Plan 3 / Postgraduate Loan | £21,000 | 6% |
| Plan 4 | £33,795 | 9% |
| Plan 5 | £25,000 | 9% |
| Postgraduate Loan | £21,000 | 6% |
Most undergraduate student loan plans use a repayment rate of 9% above the relevant threshold. Postgraduate Loans use a rate of 6% above their threshold. If you have more than one type of student loan, your total deduction may include more than one repayment calculation.
For example, someone with a Plan 2 loan only starts making Plan 2 repayments once their income is above £29,385. The repayment is then based on income above that level, not on their whole salary.
VAT Thresholds for 2026/27
VAT is usually most relevant to businesses and self-employed people rather than employees. If your taxable turnover goes above the VAT registration threshold, you may need to register for VAT.
| VAT item | 2026/27 value |
|---|---|
| VAT registration threshold | £90,000 |
| VAT deregistration threshold | £88,000 |
| Standard VAT rate | 20% |
How These 2026/27 Thresholds Affect Take-Home Pay
Your take-home pay is the amount left after deductions such as Income Tax, National Insurance, pension contributions and student loan repayments. Two people with the same gross salary can have different take-home pay if they have different tax codes, pension settings, student loan plans or employment types.
For employees, the typical calculation starts with gross salary, then subtracts PAYE Income Tax, employee National Insurance, workplace pension contributions and any student loan repayments. For self-employed workers, the calculation is usually based on profit and includes Income Tax and self-employed National Insurance estimates.
The tax year matters because thresholds can change from one year to another. A salary that produces one net pay figure in 2025/26 may produce a different figure in 2026/27 if rates, bands or repayment thresholds change.
Tax Code 1257L in 2026/27
The default tax code in this tax year data is 1257L. For many people, 1257L means the standard Personal Allowance of £12,570 is being applied through PAYE.
Your actual tax code may be different. Common reasons include taxable benefits, underpaid tax from a previous year, multiple jobs, pension income, Marriage Allowance or adjustments made by HMRC. If your tax code is wrong, your take-home pay estimate may differ from your payslip.
Why Tax Thresholds Matter
Tax thresholds decide where deductions begin and when higher rates apply. They are one of the main reasons a pay rise does not translate directly into the same increase in take-home pay. Once extra income falls into a higher tax band, or above a student loan repayment threshold, a larger share of that extra income may be deducted.
This does not mean a pay rise is bad. It means gross pay and net pay are different. Understanding the 2026/27 tax rates and thresholds helps you estimate what you will actually receive after deductions.
Useful SalaryHub Calculators
- Salary Calculator 2026/27
- Income Tax Calculator 2026/27
- Student Loan Calculator 2026/27
- Bonus Pay Calculator 2026/27
- Take-Home Pay Over the Years Calculator
Frequently Asked Questions
What is the Personal Allowance for 2026/27?
The standard Personal Allowance for 2026/27 is £12,570. This is the amount most people can earn before paying Income Tax, although it can be reduced for higher earners.
What is the basic rate tax band for 2026/27?
The basic rate band in this tax year data runs from £0 to £37,700 of taxable income, charged at 20%.
What is the higher rate tax threshold for 2026/27?
The higher rate starts after the basic rate band. In this data, higher rate tax applies from £37,700 of taxable income and is charged at 40%.
What National Insurance rate do employees pay in 2026/27?
Employees pay National Insurance at 8% between the primary threshold and upper earnings limit, then 2% above the upper earnings limit.
What is the Plan 2 student loan threshold for 2026/27?
The Plan 2 student loan threshold for 2026/27 is £29,385. Repayments are calculated at 9% of income above that threshold.
Is this guide for Scotland?
This guide uses the England, Wales and Northern Ireland Income Tax model used in SalaryHub’s tax year configuration. Scotland has separate Income Tax bands and rates for some types of income.