Personal Allowance and UK Tax Bands: £12,570, 20%, 40%, 45%
The personal allowance is the amount of income you can receive each tax year before paying income tax — £12,570 in 2026-27, frozen at that level until April 2031. Above it, income is taxed in bands: 20% basic rate up to £50,270, 40% higher rate up to £125,140, and 45% additional rate above that, in England, Wales and Northern Ireland.
Bands apply to slices, not to the whole. Earning £60,000 does not put all of it at 40%: the first £12,570 is tax-free, the next £37,700 is taxed at 20% (£7,540), and only the £9,730 above £50,270 is taxed at 40% (£3,892), for about £11,432 in total — an effective rate of 19%. Scotland sets its own bands for earnings, with six rates from 19% to 48%, though the personal allowance is the same UK-wide.
The freeze is the quiet tax rise. The allowance and the higher-rate threshold have been fixed since April 2021 and will stay fixed until 2031, so every pay rise moves more of your income into a higher band — fiscal drag. A worker who was well inside basic rate in 2021 can be a higher-rate taxpayer by 2028 on the same real income, which also changes their savings allowance, dividend treatment and child benefit position.
Between £100,000 and £125,140 the allowance is withdrawn at £1 for every £2 of income, which produces an effective marginal rate of 60% on that band (62% with NI). A pension contribution or Gift Aid donation that brings adjusted net income back under £100,000 recovers the allowance, so a £10,000 pension contribution at £110,000 can cost only £4,000 net. Above £125,140 there is no allowance at all.
Other allowances stack on top: the £1,000 personal savings allowance for basic-rate taxpayers (£500 higher rate, nil additional), the £500 dividend allowance, the £3,000 capital gains annual exempt amount, and the £1,000 trading and property allowances. Marriage allowance lets a non-taxpayer transfer £1,260 of their allowance to a basic-rate partner, worth £252 a year.
The bands also set the price of everything else: pension relief is worth 20p, 40p or 45p per pound depending on your band; the High Income Child Benefit Charge starts at £60,000; the tax-free childcare and 30-hours schemes stop at £100,000. Knowing which band your last pound falls into is the single most useful number for deciding where the next pound of savings should go.
Richify shows your marginal band on every income line and models a pension contribution or salary sacrifice as a change in take-home pay, not just a change in tax.
