UK Income Tax & How to Pay Less — The Complete Guide

Your salary is taxed in bands, not at one flat rate. For 2026/27 the first £12,570 is tax-free (your Personal Allowance), then you pay 20% up to £50,270, 40% up to £125,140, and 45% above that. This is why take-home pay can feel a lot lower than your headline salary — the top slice of your earnings is taxed at a higher rate than the first slice.

National Insurance comes on top of income tax. You pay 8% on earnings between £12,570 and £50,270, then 2% above that. Add the two together and a basic-rate earner is paying 28% on most of their income, while a higher-rate earner pays 42% on everything above £50,270.

Between £100,000 and £125,140 your Personal Allowance shrinks by £1 for every £2 you earn. In that band your effective marginal rate is 60% — higher than the 45% Additional Rate above £125,140.

The most reliable ways to pay less are pension contributions, ISAs, and the Marriage Allowance. Salary-sacrifice pension contributions cut your taxable income and get 20–45% relief depending on your band, which is also the main way to avoid the 60% marginal rate. Money inside an ISA grows tax-free, and if your spouse earns under £12,570 you can claim £252 a year through Marriage Allowance. For most people, sorting the pension is the single biggest lever available.