Understanding UK Taxes in 2025-2026
The UK tax system can be complex, but understanding how your salary is taxed is crucial for financial planning. Our comprehensive guide covers everything you need to know about income tax, National Insurance, student loan repayments, and pension contributions for the 2025-2026 tax year.
Key Changes for 2025-2026
The 2025-2026 tax year brings several important changes to UK taxation. Personal allowances, tax bands, and National Insurance thresholds have been updated. Understanding these changes is essential for accurate salary calculations and tax planning.
Income Tax Rates
Income tax is charged on earnings above the personal allowance. For 2025-2026, the personal allowance is £12,570, with basic rate tax at 20% on earnings between £12,571 and £50,270.
National Insurance
National Insurance contributions fund state benefits and the NHS. Employee rates are 12% on earnings between £12,570 and £50,270, and 2% on earnings above £50,270.
Student Loans
Student loan repayments depend on your plan type and income. Plan 2 loans require 9% repayment on earnings above £27,295, while other plans have different thresholds.
Complete UK Tax Rates Guide 2025-2026
Income Tax Rates and Bands
Income tax is progressive, meaning higher earners pay higher rates. The system uses tax bands to determine how much tax you pay on different portions of your income.
| Tax Band | Income Range | Tax Rate | England, Wales & NI | Scotland |
|---|---|---|---|---|
| Personal Allowance | £0 - £12,570 | 0% | ✓ | ✓ |
| Basic Rate | £12,571 - £50,270 | 20% | ✓ | 19% (Starter), 20% (Basic), 21% (Intermediate) |
| Higher Rate | £50,271 - £125,140 | 40% | ✓ | 42% (Higher), 45% (Advanced) |
| Additional Rate | Over £125,140 | 45% | ✓ | 48% (Top) |
National Insurance Contributions
National Insurance is a tax on earnings that funds state benefits, including the State Pension and NHS. Both employees and employers pay National Insurance, but our calculator focuses on employee contributions.
| Earnings Band | Weekly Earnings | Annual Earnings | Employee Rate |
|---|---|---|---|
| Below Lower Earnings Limit | Up to £242 | Up to £12,570 | 0% |
| Primary Threshold to Upper Earnings Limit | £242 - £967 | £12,570 - £50,270 | 12% |
| Above Upper Earnings Limit | Over £967 | Over £50,270 | 2% |
Student Loan Repayments 2025-2026
Student loan repayments are automatically deducted from your salary if you earn above certain thresholds. The amount you repay depends on which plan you're on and how much you earn above the threshold.
Student Loan Plans and Thresholds
Plan 1 (Pre-2012 Students)
Threshold: £22,015
Rate: 9% on earnings above threshold
Interest: RPI or 1%, whichever is lower
Plan 2 (2012-2023 Students)
Threshold: £27,295
Rate: 9% on earnings above threshold
Interest: RPI + up to 3%
Plan 4 (Scottish Students)
Threshold: £27,660
Rate: 9% on earnings above threshold
Interest: RPI + up to 3%
Postgraduate Loan
Threshold: £21,000
Rate: 6% on earnings above threshold
Interest: RPI + 3%
Important Note on Student Loans
If you have multiple student loans, you may pay on more than one plan simultaneously. For example, you might have both a Plan 2 undergraduate loan and a postgraduate loan, requiring separate calculations for each.
UK Salary Calculator 2025-2026
Use our comprehensive calculator to determine your exact take-home pay. Simply enter your annual salary and select your circumstances to see detailed breakdowns of income tax, National Insurance, student loan repayments, and pension contributions.
How to Use the Calculator
1. Enter your annual gross salary
2. Select your tax region (England/Wales/NI or Scotland)
3. Choose your student loan plan if applicable
4. Enter your pension contribution percentage
5. View your detailed breakdown and take-home pay
Pension Contributions and Tax Relief
Pension contributions are one of the most tax-efficient ways to save for retirement. Understanding how pension contributions affect your tax bill can help you maximize your take-home pay and retirement savings.
Types of Pension Contributions
Salary Sacrifice
Contributions made before tax and National Insurance are calculated. This reduces your gross salary but provides maximum tax efficiency, saving both income tax and National Insurance.
Relief at Source
Contributions made from your net pay with basic rate tax relief automatically added. Higher rate taxpayers can claim additional relief through their tax return.
Annual Allowance and Limits
For the 2025-2026 tax year, the annual allowance for pension contributions is £60,000. This is the maximum amount you can contribute to pensions in a tax year while still receiving tax relief. High earners may face a reduced annual allowance through the tapered annual allowance rules.
| Income Level | Annual Allowance | Notes |
|---|---|---|
| Up to £260,000 | £60,000 | Full annual allowance |
| £260,000 - £360,000 | £60,000 - £10,000 | Tapered reduction |
| Over £360,000 | £10,000 | Minimum allowance |
Regional Tax Differences: England, Wales, Northern Ireland vs Scotland
While most UK tax rules are consistent across the country, Scotland has its own income tax rates and bands. This affects how much income tax you pay, though National Insurance and other deductions remain the same.
Scottish Income Tax Rates 2025-2026
Scotland has a more progressive tax system with additional tax bands and different rates. Scottish taxpayers are identified by their postcode and pay Scottish rates automatically through PAYE.
| Scottish Tax Band | Income Range | Tax Rate |
|---|---|---|
| Personal Allowance | £0 - £12,570 | 0% |
| Starter Rate | £12,571 - £14,876 | 19% |
| Basic Rate | £14,877 - £26,561 | 20% |
| Intermediate Rate | £26,562 - £43,662 | 21% |
| Higher Rate | £43,663 - £75,000 | 42% |
| Advanced Rate | £75,001 - £125,140 | 45% |
| Top Rate | Over £125,140 | 48% |
Tax Planning Strategies for 2025-2026
Effective tax planning can help you minimize your tax liability and maximize your take-home pay. Here are key strategies to consider for the 2025-2026 tax year.
Maximize Pension Contributions
Pension contributions provide immediate tax relief and reduce your taxable income. Consider salary sacrifice schemes for maximum efficiency, saving both income tax and National Insurance.
Use Your ISA Allowance
The ISA allowance for 2025-2026 is £20,000. While ISA contributions don't provide immediate tax relief, all growth and income within ISAs is tax-free.
Consider Salary Sacrifice Benefits
Beyond pensions, salary sacrifice can be used for cycle-to-work schemes, electric cars, and childcare vouchers, providing tax and National Insurance savings.
Time Your Income
If you have control over when you receive income (such as bonuses or dividends), timing can help manage your tax liability across different tax years.
High Earner Considerations
If you earn over £100,000, you'll face a gradual reduction in your personal allowance. For every £2 earned over £100,000, your personal allowance reduces by £1, creating an effective tax rate of 60% on income between £100,000 and £125,140.
Frequently Asked Questions
When does the 2025-2026 tax year start?
The UK tax year runs from 6 April to 5 April the following year. The 2025-2026 tax year starts on 6 April 2025 and ends on 5 April 2026.
How accurate is the salary calculator?
Our calculator uses the latest official rates and thresholds for 2025-2026. However, individual circumstances may vary, and you should consult a tax professional for specific advice.
Do I need to file a tax return?
Most employees don't need to file a tax return if their only income is from employment. However, you may need to file if you're self-employed, have rental income, or earn over £100,000.
What if I have multiple jobs?
If you have multiple jobs, your personal allowance and basic rate band are usually allocated to your main job. Secondary jobs may be taxed at higher rates through the PAYE system.