How income tax and National Insurance work in the UK
You get a tax-free allowance, then each slice of income is taxed at its own rate, with National Insurance on top.
UK employees pay income tax and National Insurance (NI) through PAYE. Income tax is worked out on income above your Personal Allowance. Scotland sets its own income tax rates, while National Insurance is the same across the UK.
Tax bands for 2026-27 (England, Wales and Northern Ireland)
| Band | Taxable income | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
National Insurance and student loans
For a category A employee, National Insurance is 8% on earnings between £12,570 and £50,270 and 2% above, using annual figures (employers apply weekly or monthly thresholds). Student loans take 9% of income over your plan's threshold, or 6% over £21,000 for a postgraduate loan.
Worked example: £45,000 in England
£45,000 − £12,570 = £32,430 of taxable income.
20% of £32,430 is £6,486 of income tax.
8% × (£45,000 − £12,570) is £2,594.40.
£45,000 − £6,486 − £2,594.40 = £35,919.60 a year, about £2,993 a month.
✨ Key Takeaways
- The Personal Allowance is tax-free, then each band has its own rate.
- Scotland has different income tax rates.
- National Insurance is separate from income tax.
- Check GOV.UK for the current year's figures.