UK Income Tax Guide: PAYE, Tax Bands & Self Assessment
UK income tax depends on your taxable income, allowances and where you live. The UK tax year runs from 6 April to 5 April. This guide explains the basics for employees and self-employed people, and how to use a tax estimate sensibly. Rates can change, and Scotland has separate rates for most non-savings, non-dividend income. Check the relevant tax year and nation before making decisions.
UK income tax bands and the Personal Allowance
For 2026–27, the standard Personal Allowance is £12,570. It is reduced by £1 for each £2 of adjusted net income over £100,000 and can be lost entirely. In England, Wales and Northern Ireland, the main non-savings income rates are 20%, 40% and 45% on successive slices above the allowance. Scotland uses different bands and rates. Savings and dividends may have separate allowances and rates. A higher marginal band applies only to the income in that band; moving into it does not mean all income is taxed at that rate.
| Taxable income after allowances | Rate |
|---|---|
| First £37,700 | 20% |
| £37,701 to £125,140 | 40% |
| Over £125,140 | 45% |
PAYE employees: check your tax code and payslips
Most employees have Income Tax collected through Pay As You Earn (PAYE). Your tax code tells your employer how much tax-free pay to apply during the year. Check payslips, your P60 and HMRC’s online record, especially after changing jobs, receiving taxable benefits, starting a second job or drawing pension income. If a tax code is wrong, you may pay too much or too little during the year; a calculator cannot correct payroll records.
- Keep your P60 and P45, payslips and records of taxable benefits.
- Check that all employments and pensions are represented in your HMRC record.
- Review a changed tax code and contact HMRC if the underlying details are incorrect.
- Remember National Insurance, pension deductions and student-loan repayments are separate from Income Tax.
Self Assessment and self-employment
You may need to register for Self Assessment if you have untaxed income or meet another HMRC filing condition. A sole trader reports business income and allowable expenses; taxable profit is not the same as turnover or cash left in the bank. Keep invoices, receipts, mileage records and a clear split between business and personal costs. Claim only expenses permitted for your circumstances. Some people must make payments on account, which can make the first payment year feel larger. HMRC publishes filing and payment deadlines; check them for each tax year and allow time to register.
Allowances, reliefs and situations that change your bill
Marriage Allowance, pension contributions, Gift Aid, savings allowances and other reliefs may affect taxable income or tax due, each under specific eligibility rules. If your adjusted net income exceeds £100,000, the Personal Allowance taper can produce a high effective marginal rate across part of that range. Child Benefit may also be affected by the High Income Child Benefit Charge. These interactions make an estimate useful for planning, but not a substitute for checking detailed HMRC rules.
A practical filing and planning checklist
- Identify the correct tax year (6 April to 5 April) and whether Scottish rates apply.
- Gather P60/P45, bank or pension statements, benefit details and Self Assessment records.
- Separate taxable income, allowable deductions and tax credits rather than treating them as interchangeable.
- Compare PAYE already paid with estimated annual liability and plan for any balance or payments on account.
- Use HMRC guidance or a qualified adviser where residence, overseas income, complex investments or multiple reliefs are involved.