UK Income Tax and National Insurance Explained (2025/26)
The Personal Allowance, tax bands, National Insurance and the £100k trap, all explained in plain English with the 2025/26 rates and worked examples.
UK payslips deduct two separate things before your salary reaches your account: Income Tax and National Insurance. They work differently, use different thresholds, and together explain exactly why your take-home pay is lower than your headline salary. Here is the whole system for the 2025/26 tax year, in plain English.
The Personal Allowance
Everyone starts with a tax-free Personal Allowance of £12,570. You pay no income tax on earnings up to that amount. Only income above it enters the tax bands.
The income tax bands
Like most systems, UK income tax is banded, each rate applies only to the income within that band (figures for England, Wales and Northern Ireland; Scotland sets its own bands):
| Band | Taxable income | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 – £50,270 | 20% |
| Higher rate | £50,271 – £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
National Insurance
On top of income tax, employees pay Class 1 National Insurance:
- 8% on earnings between £12,570 and £50,270
- 2% on earnings above £50,270
NI funds the state pension and benefits, and it is separate from income tax, with its own thresholds.
A worked example
On a £35,000 salary:
- Income tax: 20% on (£35,000 − £12,570) = £4,486
- National Insurance: 8% on (£35,000 − £12,570) = £1,794
- Take-home pay: about £28,720 a year (~£2,393/month)
That is an effective deduction rate of roughly 17.9%, well below the 20% headline, because the first £12,570 is tax-free.
How the effective rate rises with salary
Between £100,000 and £125,140, your Personal Allowance shrinks by £1 for every £2 you earn. That makes this slice of income effectively taxed at around 60%. Many higher earners use pension contributions to bring their taxable income back below £100,000.
What this calculator-style view leaves out
Your real payslip may also include pension contributions, student loan repayments, salary sacrifice arrangements and a non-standard tax code. Scotland, as noted, has different income tax bands. Treat the figures here as a clear estimate of the core deductions.
Pension contributions usually come out before tax, lowering your taxable income. For higher earners, and especially those near £100,000, this can be one of the most effective ways to reduce tax.
See your UK take-home pay. Enter your salary for an instant Income Tax and National Insurance breakdown.
Open the UK Take-Home Pay Calculator →The bottom line
UK take-home pay comes down to the Personal Allowance, three banded tax rates, and National Insurance on top. Each rate applies only to the income within its band, your effective rate is always lower than your top rate, and the £100,000 taper is the one quirk worth planning around.
Frequently asked questions
What is the Personal Allowance for 2025/26?
£12,570. This is the amount you can earn before paying any income tax. It is reduced by £1 for every £2 you earn above £100,000, disappearing entirely at £125,140.
How much National Insurance do employees pay?
For 2025/26, employees pay Class 1 NI at 8% on earnings between £12,570 and £50,270, and 2% on earnings above £50,270.
What is the £100,000 tax trap?
Between £100,000 and £125,140, you lose £1 of Personal Allowance for every £2 earned. This means that slice of income is effectively taxed at around 60%, a quirk worth planning around with pension contributions.