Income Tax Calculator
Understanding exactly how much income tax you pay — and why — matters just as much when you are planning a mortgage application as it does for everyday budgeting. Our income tax calculator breaks down your 2026/27 tax bill by band in seconds, so you can see precisely where your money goes.
Income Tax Calculator
Calculate your UK income tax and National Insurance for 2026/27, broken down by band.
How UK Income Tax Bands Work
Income tax in the UK is progressive — you only pay each rate on the portion of income that falls within that band, not on your whole income. Everyone gets a tax-free Personal Allowance of £12,570 before any tax is due. Above that, the basic rate of 20% applies up to £50,270, the higher rate of 40% applies from £50,271 to £125,140, and the additional rate of 45% applies above that. This structure means your “marginal rate” — the rate on your next pound earned — is always higher than your “effective rate”, which is your total tax bill as a percentage of your whole income.
The £100,000 Trap
One of the most important, and least understood, features of UK income tax is what happens above £100,000. Your Personal Allowance reduces by £1 for every £2 you earn above this threshold, disappearing entirely at £125,140. This creates an effective marginal rate of 60% on income in that £100,000–£125,140 band — higher than even the additional rate — which is why pension contributions and Gift Aid donations, both of which can reduce your “adjusted net income” below £100,000, are particularly valuable tax planning tools for anyone in this bracket.
National Insurance: A Separate Deduction
Income tax and National Insurance are calculated separately but both come out of your pay through PAYE. Employees pay National Insurance at 8% on earnings between the Primary Threshold and the Upper Earnings Limit, then 2% above that. Unlike income tax, National Insurance does not have a Personal Allowance-style tax-free amount in the same way, though it does have its own lower earnings threshold before any NI is due.
Why This Matters for a Mortgage Application
Lenders assess affordability based on your net, take-home income, not your gross salary — so understanding your actual tax and NI deductions helps you judge realistically what a lender is likely to consider affordable, well before you formally apply. This is a useful companion to our Mortgage Affordability Calculator, which uses similar underlying assumptions about disposable income.
A Worked Example
On a £48,000 salary, taxable income after the Personal Allowance is £35,430. Income tax at 20% comes to £7,086. National Insurance at 8% on income above the primary threshold adds roughly £2,834. Combined, that is just under £9,920 in deductions — an effective tax-and-NI rate of about 20.7%, even though the marginal rate on the last pound earned is 28% once both taxes are combined.
Tax-Efficient Ways to Reduce Your Bill
Beyond simply accepting your tax bill as calculated, several legitimate approaches can reduce it. Pension contributions reduce your taxable income directly, and for anyone earning between £100,000 and £125,140, they can also help restore some or all of a tapered Personal Allowance, which is particularly valuable given the 60% effective marginal rate in that band. Charitable donations made through Gift Aid similarly reduce your adjusted net income for higher-rate relief purposes, with higher and additional rate taxpayers able to claim back the difference between basic and their higher rate through Self Assessment. Salary sacrifice arrangements — swapping salary for benefits like additional pension contributions or a company car scheme — can reduce both income tax and National Insurance, since the sacrificed amount never counts as taxable pay in the first place.
Frequently Asked Questions
Does this calculator cover Scottish income tax?
Yes — Scotland has its own bands, including a 19% starter rate and separate intermediate and higher bands, which this calculator applies automatically when you select the Scotland option.
Are pension contributions tax-free?
Contributions made before tax (such as through salary sacrifice or many workplace schemes) reduce your taxable income directly, meaning you effectively get tax relief at your marginal rate on every pound contributed, up to annual allowance limits.
What is the difference between gross and net income?
Gross income is your salary before any deductions. Net income (or take-home pay) is what remains after income tax, National Insurance, and any other deductions such as pension contributions or student loan repayments.
Do self-employed people pay income tax the same way?
The income tax bands are the same, but self-employed individuals pay Class 4 (and Class 2, where applicable) National Insurance instead of the employee rates, and settle their tax through Self Assessment rather than PAYE.