The UK 40% Tax Bracket Explained (2025/26)

You've had a good year, your income has crept up, and now you're worried about "going into the 40% bracket". The good news is that it almost certainly doesn't mean what you think it means.

The 40% rate, properly called the higher rate, applies to a slice of your income above £50,270 in the 2025/26 tax year (England, Wales and Northern Ireland). It never applies to all your earnings, only the part above the threshold.

This guide explains how the higher rate actually works, how much you can earn before it bites, how it differs in Scotland, and the legitimate ways to keep more of what you earn. We've written it for employees, contractors and business owners who are near, or just over, the line.

How does the UK income tax system work?

Income tax is charged on your income for the tax year, which runs from 6 April to 5 April. The 2025/26 tax year runs from 6 April 2025 to 5 April 2026.

The system is banded. As your income rises, different slices are taxed at different rates, a bit like steps on a staircase. Climbing onto a higher step doesn't change the tax on the steps below it.

Here are the main rates for England, Wales and Northern Ireland in 2025/26.

Most people can earn £12,570 tax-free. That's the personal allowance, the amount you can receive before any income tax is due, for 2025/26.

There's one catch worth flagging. If your adjusted net income goes over £100,000, your personal allowance drops by £1 for every £2 above £100,000, and it disappears entirely once you reach £125,140.

Scotland sets its own income tax rates and bands for earnings (non-savings, non-dividend income), and they're different. We cover those below.

What is the 40% tax bracket?

The 40% tax bracket, officially the higher rate, is the rate that applies to the slice of your income between £50,271 and £125,140 in 2025/26 (England, Wales and Northern Ireland).

A few things are worth being clear about:

• It's a marginal rate. It only applies to income above £50,270.
• You don't pay 40% on everything you earn, only on the part over the threshold.
• It sits between the basic rate (20%) and the additional rate (45%).
• The higher rate threshold is £50,270 and is frozen until 5 April 2031.

The confusion usually comes from thinking that earning a pound over £50,270 means your whole income is suddenly taxed at 40%. It isn't, and the next sections show exactly why.

How much can I earn before I pay 40% tax?

For 2025/26 you start paying 40% tax once your total taxable income goes above £50,270. That £50,270 figure already includes your personal allowance, so it's the total income point at which the higher rate begins, not a figure you reach after taking the allowance off.

What matters for planning is that several things reduce the income that counts before you hit that point:

• Pension contributions (via salary sacrifice, or relief on personal contributions)
• Allowable work expenses and professional subscriptions
• The trading allowance, if you're self-employed

So your headline gross pay can sit above £50,270 while the income that actually counts stays below it, which keeps you out of the higher rate.

Illustrative example. Tom has a gross salary of £53,000 and pays £3,000 into his workplace pension through salary sacrifice. That reduces his pay for tax to £50,000, which is below the £50,270 threshold, so none of it is taxed at 40%. Without the contribution, the slice between £50,270 and £53,000 would have been taxed at 40%.

That's why knowing what counts as taxable income matters so much for planning. If you want a quick view of your own position, our income tax calculator does the banding for you.

What are marginal tax rates and how do they work?

A marginal rate means the rate applies only to the income within that band, never to your whole income. This single idea clears up most higher rate confusion.

Picture the staircase again:

• The first step (up to £12,570) is free.
• The second step (£12,571 to £50,270) costs 20p in the pound.
• The third step (£50,271 to £125,140) costs 40p in the pound.
• The fourth step (over £125,140) costs 45p in the pound.

You only ever pay the rate for the step you're actually on. Earning more never reduces your take-home pay. Some people turn down a pay rise or extra work to "stay out of the 40% bracket", but that's a myth. You always keep more by earning more, because only the income above the threshold is taxed at the higher rate.

How is my tax calculated if I earn over £50,270?

Let's work two examples. Both assume the standard personal allowance and 2025/26 rates for England, Wales and Northern Ireland.

Illustrative example 1: gross pay above £50,270 but no higher rate due.

You earn £60,000 and pay £10,000 into your pension through salary sacrifice.

• Pay for tax after the £10,000 sacrifice: £50,000
• This is below the £50,270 higher rate threshold, so none of it reaches the 40% band.
• Personal allowance: £12,570, leaving £37,430 taxed at 20%.

Income tax is £37,430 × 20% = £7,486, and you pay no 40% tax at all. Without the pension contribution, your £60,000 would put the slice between £50,270 and £60,000 into the higher rate.

Illustrative example 2: into the higher rate.

You earn £65,000.

• Personal allowance: £12,570
• Taxable income: £65,000 − £12,570 = £52,430

Now split that across the bands.

• Basic rate: the band runs from your allowance up to £50,270, so £50,270 − £12,570 = £37,700 taxed at 20% = £7,540.
• Higher rate: £52,430 − £37,700 = £14,730 of taxable income sits in the higher band. In gross terms, that's the income between £50,270 and £65,000, which is £14,730, taxed at 40% = £5,892.
• Total income tax: £7,540 + £5,892 = £13,432.

Even though you're "in the 40% bracket", your effective rate (total tax divided by total income) is £13,432 ÷ £65,000 = about 20.7%, not 40%. The bulk of your income is still taxed at 0% or 20%. That gap between your marginal rate and your effective rate is exactly why marginal rates matter.

How does the higher rate differ in Scotland?

If you're a Scottish taxpayer, your earnings are taxed under Scotland's own rates and bands, which are more granular and reach the higher rate sooner.

Here are the Scottish rates and bands for 2025/26 (based on the standard UK personal allowance of £12,570).

The headline differences:

• The Scottish higher rate is 42% and starts at £43,663 of income, well before the £50,270 used in the rest of the UK.
• There are more bands, including a starter rate and an intermediate rate.
• The top rate is 48%, above the 45% additional rate elsewhere in the UK.

One important exception: savings interest and dividends are taxed at UK-wide rates for everyone, including Scottish taxpayers. So dividends are still taxed at 8.75%, 33.75% and 39.35% wherever you live in the UK.

If you're a Scottish taxpayer approaching £43,663, the planning ideas below are worth acting on sooner, because your marginal rate on the next slice of income is 42% rather than 40%.

What's the impact on my take-home pay?

Crossing into the higher rate does change your take-home pay, but usually less dramatically than people fear.

National Insurance is charged separately from income tax, and it actually eases off as you cross the higher rate threshold. For 2025/26, employees pay Class 1 NICs at 8% on earnings between £12,570 and £50,270, then 2% on earnings above £50,270.

So on each extra pound of salary above £50,270 you pay 40p income tax and 2p NICs, and keep 58p. On a pound in the basic rate band you pay 20p tax and 8p NICs, keeping 72p. The combined rate on income in the higher band is 42%, not 40%.

Being a higher rate taxpayer also brings some upsides. You can claim higher rate relief on personal pension contributions, and extra relief on Gift Aid donations, both of which we touch on next.

How can I reduce my higher rate tax bill legally?

These are all legitimate, well-established reliefs, not avoidance schemes. The right mix depends on your circumstances, so treat this as a starting point.

Pay more into your pension

For most higher rate taxpayers, pension contributions are the single most effective lever. Contributions get tax relief at your highest marginal rate, and salary sacrifice arrangements can save National Insurance too. They also reduce your taxable income, which can pull you back under the £50,270 threshold.

Illustrative example. Sarah earns £55,000 and arranges a £5,000 pension contribution through salary sacrifice.

Without the contribution:

• Taxable income after the £12,570 allowance: £42,430
• Basic rate: £37,700 × 20% = £7,540
• Higher rate: £42,430 − £37,700 = £4,730 × 40% = £1,892
• Total income tax: £9,432

With the £5,000 salary sacrifice:

• Pay for tax: £50,000
• Taxable income after the £12,570 allowance: £37,430 (all in the basic rate band)
• Basic rate: £37,430 × 20% = £7,486
• Total income tax: £7,486

That cuts her income tax by £9,432 − £7,486 = £1,946. Because salary sacrifice also reduces NICs, she saves a further £5,000 × 8% = £400 in employee National Insurance, for a combined saving of £2,346, and the £5,000 still goes into her pension.

Use ISAs to shelter savings and investments

Income and gains inside an ISA are free of income tax and Capital Gains Tax. That's especially valuable once you're a higher rate taxpayer, since interest above your savings allowance and dividends above the £500 dividend allowance would otherwise be taxed at higher rates. The current ISA subscription limits are on gov.uk.

Claim higher rate relief on Gift Aid donations

When you Gift Aid a donation, the charity reclaims basic rate tax, and as a higher rate taxpayer you can claim the difference between the higher and basic rates. You do this through Self Assessment or by asking HMRC to adjust your tax code.

Consider other salary sacrifice benefits

Beyond pensions, many employers offer salary sacrifice for things like the Cycle to Work scheme or electric-vehicle schemes. These reduce your taxable pay while giving you something useful in return.

Use your remaining allowances

Higher rate taxpayers still get the personal savings allowance (£500 of savings interest tax-free at the higher rate), the £500 dividend allowance, and the £3,000 Capital Gains Tax annual exempt amount for 2025/26. Structuring income and disposals to use these can save real money.

Getting the order and timing right across pensions, dividends and allowances is where good advice pays for itself. If you'd like a second pair of eyes, our self-assessment service and tax advisory team can help.

Will the 40% threshold change soon?

For 2025/26 the higher rate is 40% and the threshold is £50,270. The personal allowance (£12,570) and the higher rate threshold (£50,270) are frozen at these levels until 5 April 2031.

Frozen thresholds matter because of fiscal drag. As pay rises with inflation, more income is pushed past a fixed threshold, so people drift into higher bands even when their real spending power hasn't moved. If you're earning close to £50,270, a normal pay rise can tip part of your income into the higher rate, which is another reason the pension and salary sacrifice ideas above are worth reviewing each year.

Tax rates and thresholds are set in the Budget, so they can change in future. We only state what's currently law, and we'd treat anything else as proposed until it's enacted.

Frequently asked questions

Book a free Tax Health Check →