There is an amount of income which does not need to be taxed. This is known as your ‘Personal Allowance’. This is taken into consideration over all employments (i.e. you don’t have a separate allowance for each job or role).
You’ll find the allowance listed on your Tax Code – the numbers convert directly to an allowance.
Regional Differences
Taxation has been in place in some form or another since around the 1200s when export tax was added to wool, and import taxes on wine. There have also been the poor tax, a tax to help rebuild the City of London after the great fire, and finally a tax on the number of windows which a house had.
Income Tax in the current form has been applied in the United Kingdom since December 1798, when it was introduced as a way for the Government to fund the development and purchase of weapons and equipment in preparation for the Napoleonic Wars.
The original tax amount was 2 old pence in the pound on incomes over £60. In the first year, just over £6 million was raised.
But fast forward over the past few centuries and we now have a standardised tax system in place. The last major change was from April 2017 when Scotland used their new devolved powers to introduce a slightly different tax system to the rest of the United Kingdom.
As such, depending on where you live, you may have a slightly different income tax system.
England, Wales and Northern Ireland
2026/27 Financial Year
The Personal Allowance has been £12,570 since the 2021/22 tax year. The tax rate you pay then depends on your income above the Personal Allowance.
| Personal Allowance (0%) | Up to £12,570 |
| Basic rate (20%) | £12,571 – £50,270 |
| Higher rate (40%) | £50,271 – £125,140 |
| Additional rate (45%) | Above £125,140 |
These figures are unchanged from 2025/26.
What has changed since 2022/23
The headline rates of 20%, 40% and 45% have not moved, but the point at which the 45% rate starts has. From 6 April 2023 the additional rate threshold dropped from £150,000 to £125,140, so income between those two figures is now taxed at 45% rather than 40%.
The thresholds themselves have been frozen rather than rising with inflation. The freeze was originally set to run to April 2026, was extended to April 2028, and at the Budget in November 2025 was extended again to 2030/31. Because the bands stay still while wages rise, more income gradually falls into the higher bands over time.
Earning over £100,000
If your income is above £100,000, your Personal Allowance is reduced by £1 for every £2 you earn above that figure. By £125,140 it has gone entirely. This applies across the whole of the UK, including Scotland.
Scotland
The Scottish Government sets its own rates and bands, and these change each year. The Personal Allowance itself is the same £12,570 as the rest of the UK, because allowances are not devolved.
2026/27 Financial Year
| Starter Rate (19%) | £12,571 – £16,537 |
| Basic Rate (20%) | £16,538 – £29,526 |
| Intermediate Rate (21%) | £29,527 – £43,662 |
| Higher Rate (42%) | £43,663 – £75,000 |
| Advanced Rate (45%) | £75,001 – £125,140 |
| Top Rate (48%) | Above £125,140 |
The rates are the same as 2025/26. The starter and basic rate bands were widened, so a little more income is taxed at the lower rates.
2025/26 Financial Year
| Starter Rate (19%) | £12,571 – £15,397 |
| Basic Rate (20%) | £15,398 – £27,491 |
| Intermediate Rate (21%) | £27,492 – £43,662 |
| Higher Rate (42%) | £43,663 – £75,000 |
| Advanced Rate (45%) | £75,001 – £125,140 |
| Top Rate (48%) | Above £125,140 |
2024/25 Financial Year
This year introduced the new ‘Advanced Rate’ at 45%, and increased the ‘Top Rate’ from 47% to 48%.
| Starter Rate (19%) | £12,571 – £14,876 |
| Basic Rate (20%) | £14,877 – £26,561 |
| Intermediate Rate (21%) | £26,562 – £43,662 |
| Higher Rate (42%) | £43,663 – £75,000 |
| Advanced Rate (45%) | £75,001 – £125,140 |
| Top Rate (48%) | Above £125,140 |
2023/24 Financial Year
This year the Higher Rate rose from 41% to 42%, the Top Rate rose from 46% to 47%, and the Top Rate threshold dropped from £150,000 to £125,140.
| Starter Rate (19%) | £12,571 – £14,732 |
| Basic Rate (20%) | £14,733 – £25,688 |
| Intermediate Rate (21%) | £25,689 – £43,662 |
| Higher Rate (42%) | £43,663 – £125,140 |
| Top Rate (47%) | Above £125,140 |
2022/23 Financial Year
| Starter Rate (19%) | £12,571 – £14,732 |
| Basic Rate (20%) | £14,733 – £25,688 |
| Intermediate Rate (21%) | £25,689 – £43,662 |
| Higher Rate (41%) | £43,663 – £150,000 |
| Top Rate (46%) | Above £150,000 |
Examples
Example (2026/27): Amanda earns £10,000 in her job. The first £12,570 is tax free, therefore as she is not above this amount, her full income is tax-free.
Example 2 (2026/27 – England, Wales and Northern Ireland): Tom earns £20,000 in his job. The first £12,570 is tax-free. The remaining £7,430 is taxed at the Basic Rate of 20% which means he will pay £1,486 tax.
Example 3 (2026/27 – Scotland): Emma earns £20,000 in her job. The first £12,570 is tax-free.
The starter rate (19%) is applied to the next £3,967 = £753.73
The basic rate (20%) is applied to the remaining £3,463 = £692.60
Total tax paid is £1,446.33
Note: The examples above do not include National Insurance Contributions, but instead are designed to show how allowances work.
Employers will automatically calculate tax amounts on employment, and this is confirmed on your P60 annual summary. The figures from this document are required to complete a tax return when you’re self employed.
Have more than one job?
If you also have employment outside of being self employed, this may be slightly more complex as you will need information from your employer to complete your tax return.
When you receive your P60, this will include information on how much tax you have paid on your employment, and is taken into consideration when you declare any profits from your self employment.