Understanding Tax Bands

Why doesn’t everyone pay the same rate of Income Tax? 

Income Tax is divided into bands, meaning different portions of your income can be taxed at different rates. 

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For 2026–27, the standard Personal Allowance is £12,570. 

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For England, Wales and Northern Ireland, if you receive the full Personal Allowance: 

• first £12,570 — normally no Income Tax 

• £12,571 to £50,270 — 20% basic rate 

• £50,271 to £125,140 — 40% higher rate 

• above £125,140 — 45% additional rate (GOV.UK) 

 

How do tax bands actually work? 

The rates are marginal. 

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This means entering the 40% band does not mean your entire income suddenly gets taxed at 40%. 

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Only the part of your taxable income falling inside that band is taxed at 40%. 

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What happens above £100,000? 

The standard Personal Allowance starts to reduce when adjusted net income exceeds £100,000. 

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It falls by £1 for every £2 of adjusted net income above £100,000 and becomes zero at £125,140. (GOV.UK) 

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What about Scotland? 

Scotland has different rates and bands for earnings. For 2026–27 these include 19%, 20%, 21%, 42%, 45% and 48% bands. (GOV.UK) 

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Key takeaway 

A higher tax band only applies to the portion of income within that band — not to all of your earnings.