Income Tax Calculator

Income tax is the single largest deduction from most people’s earnings in the United Kingdom. Whether you are employed, self-employed, or receiving pension income, understanding how income tax is calculated empowers you to plan ahead and keep more of what you earn. For the 2025/26 tax year (6 April 2025 to 5 April 2026), the key thresholds and rates remain frozen as part of the government’s ongoing stealth tax strategy, meaning more earners are being dragged into higher tax bands through fiscal drag.

How the Personal Allowance Works

Every UK taxpayer receives a tax-free Personal Allowance of £12,570 for 2025/26. You pay zero income tax on income up to this amount. However, the Personal Allowance is not universal at higher income levels: once your adjusted net income exceeds £100,000, your allowance is reduced by £1 for every £2 of income above that threshold. This means the Personal Allowance is entirely eliminated at £125,140 of income, creating an effective 60% marginal tax rate in the £100,000 to £125,140 band. This is one of the most commonly overlooked tax traps, and proactive tax planning can help mitigate its impact through pension contributions or charitable giving.

Income Tax Bands and Rates for 2025/26

After your Personal Allowance, income is taxed progressively. The Basic Rate of 20% applies to taxable income from £12,571 to £50,270. The Higher Rate of 40% covers income from £50,271 to £125,140. The Additional Rate of 45% applies to all income above £125,140. These bands have been frozen since 2021, which means that wage growth continues to push more taxpayers into higher bands than they would have been in had thresholds risen with inflation.

National Insurance Contributions Alongside Income Tax

National Insurance (NI) is often treated as a separate obligation, but in practice it functions as an additional income tax. For employees in 2025/26, Class 1 NI is charged at 8% on earnings between £12,570 and £50,270, and at 2% on earnings above £50,270. This means a basic rate taxpayer earning £30,000 pays an effective combined rate of 28% on their taxable income (20% income tax plus 8% NI). If you are self-employed, you pay Class 2 and Class 4 NI instead, with slightly different rates and thresholds.

Common Tax Deductions and Reliefs

Several deductions can reduce your taxable income before the tax bands are applied. Pension contributions receive tax relief at your marginal rate, meaning a higher rate taxpayer contributing £10,000 to a pension effectively pays only £6,000 after relief. The Marriage Allowance lets a non-taxpayer transfer £1,260 of their Personal Allowance to a basic rate taxpayer spouse, saving up to £252 per year. If you run a small business, claiming all allowable business expenses is essential to reducing your Self Assessment bill. Charitable donations under Gift Aid extend your basic rate band, which can be valuable for those near the higher rate threshold.

When Should You Seek Professional Tax Advice?

While our calculator gives you an accurate snapshot of your tax position, professional guidance becomes invaluable in more complex situations. If your income exceeds £100,000, you have multiple income sources, you are a company director choosing between salary and dividends, or you have capital gains to manage, working with a qualified tax adviser can identify savings that far outweigh the cost of advice. At London Accountants, our chartered tax advisors specialise in helping individuals and business owners structure their affairs tax-efficiently while remaining fully compliant with HMRC requirements.