Payslips show a lot of numbers. But very few employees could explain how their tax and National Insurance were actually calculated. There’s the Personal Allowance. There are three tax bands. And National Insurance runs on its own separate thresholds entirely. So most people just trust the deduction is correct and move on.
Let’s change that. Here’s exactly how it works for the 2026/27 tax year, verified against official rates.
The Personal Allowance and Income Tax Bands for 2026/27
Every UK taxpayer gets a Personal Allowance of £12,570. This is the amount you can earn tax-free each year. It’s been frozen at this level since 2021/22. And it’s set to stay frozen until at least 2031, according to the House of Commons Library’s official rates and allowances briefing.
Above that allowance, income gets taxed across three bands in England, Wales, and Northern Ireland:
- Basic rate: 20% on income from £12,570 to £50,270
- Higher rate: 40% on income from £50,270 to £125,140
- Additional rate: 45% on income above £125,140
You can confirm these figures yourself on GOV.UK’s official Income Tax rates and Personal Allowances page, which is the authoritative source for current thresholds. Scotland uses a different system entirely — more on that below.
Real Example: £45,000 Salary Take-Home Pay
Let’s run the numbers on a real salary.
- Gross salary: £45,000
- Personal Allowance: £12,570
- Taxable income: £45,000 − £12,570 = £32,430
That £32,430 sits entirely inside the basic rate band, since the band runs up to £37,700 above the allowance. So the whole amount gets taxed at 20%:
Income tax: £32,430 × 20% = £6,486
Next comes National Insurance. The employee main rate is 8% for 2026/27, and it applies to earnings between the primary threshold (roughly £12,570/year) and the upper earnings limit (roughly £50,270/year):
NI: £32,430 × 8% = £2,594.40
Add both together:
Total tax + NI: £9,080.40 Take-home pay: £45,000 − £9,080.40 = £35,919.60/year, or approximately £2,993/month
National Insurance Explained
National Insurance works differently from income tax. It’s calculated weekly or monthly, not annually. And it funds specific benefits, including the State Pension. For 2026/27, the main employee rate is 8%. This applies to earnings between the primary threshold and the upper earnings limit. Above that upper limit, a lower 2% rate kicks in instead. You can find the full breakdown on GOV.UK’s National Insurance page.
The 60% Tax Trap (£100,000–£125,140)
Here’s one of the most misunderstood parts of the UK tax system.
Once your adjusted net income passes £100,000, your Personal Allowance starts disappearing. You lose £1 of allowance for every £2 you earn above that threshold. By £125,140, the allowance is gone completely.
At the same time, you’re paying 40% higher-rate tax on that income. Combine the two effects, and you get an effective marginal tax rate of around 60% on earnings in that band. uktax.tools’ bracket breakdown covers this in more depth.
Many higher earners in this range use pension contributions or Gift Aid donations to bring their income back below £100,000. That way, they avoid the taper entirely.
Scotland’s Different Tax Bands
Scotland sets its own income tax rates. It doesn’t use the three-band system from the rest of the UK. Instead, it uses six bands — Starter, Basic, Intermediate, Higher, Advanced, and Top — ranging from 19% to 48%.
Scottish taxpayers still get the same UK-wide Personal Allowance of £12,570. But everything above that gets calculated differently. Check Revenue Scotland’s guidance for the current Scottish rates.
How PAYE and Tax Codes Work
Most UK employees pay tax automatically through PAYE, short for Pay As You Earn. Your employer deducts income tax and National Insurance directly from each paycheck, based on your tax code.
The standard code for someone getting the full Personal Allowance with no adjustments is 1257L. An incorrect tax code is one of the most common reasons people overpay or underpay tax without realizing it. If your code looks unfamiliar, MoneySavingExpert’s tax code checker guidance can help you work out what it means. You can also find the official rules on HMRC’s PAYE guidance page.
See your exact UK take-home pay for 2026/27. Use the UK Income Tax Calculator →
Frequently Asked Questions
How much tax will I pay on £30,000 in the UK?
On a £30,000 salary, taxable income after the £12,570 Personal Allowance is £17,430. That falls entirely within the basic rate band, so you’d owe roughly £3,486 in income tax plus National Insurance. Estimated take-home pay comes to around £24,900/year.
What is the UK Personal Allowance for 2026/27?
The Personal Allowance for 2026/27 is £12,570. Income up to this amount is tax-free. It’s gradually withdrawn once you earn above £100,000, and it reaches zero at £125,140.
Why is my tax code 1257L?
1257L is the standard tax code for 2026/27. It reflects the £12,570 Personal Allowance with no unusual adjustments. The “L” simply means you’re entitled to the standard tax-free allowance.
Do I pay National Insurance and income tax on the same earnings?
Yes, but the two use different thresholds and rates. Income tax runs on the Personal Allowance and the three tax bands. National Insurance uses its own primary threshold and upper earnings limit. So the two deductions don’t line up perfectly.
What is the 60% tax trap in the UK?
It’s the effective marginal tax rate on income between £100,000 and £125,140. You pay 40% higher-rate tax on that income. At the same time, you lose your Personal Allowance at a rate of £1 for every £2 earned. Together, that adds up to roughly 60%.
Does Scotland pay different income tax than the rest of the UK?
Yes. Scotland sets its own rates and bands, using six bands from 19% to 48%. That’s different from the three-band system (20%, 40%, 45%) used in England, Wales, and Northern Ireland. National Insurance, though, stays the same across the whole UK.