UK Income Tax and National Insurance rates

Income Tax bands

The Personal Allowance is reduced by £1 for every £2 of adjusted net income above £100,000 and is normally eliminated at £125,140.

How the Income Tax bands are applied

Income Tax rates are marginal. Reaching a higher band does not cause all of your income to be taxed at the higher rate. After deducting the available Personal Allowance, each portion of taxable income is charged at the rate for the band in which that portion falls.

The figures above describe the main non-savings, non-dividend employment-income bands for England, Wales and Northern Ireland. Scottish taxpayers use separate Scottish rates and bands. Savings income, dividends, taxable benefits and other income can also change a person’s final position.

Employee National Insurance

The calculator currently assumes employee National Insurance category A and annualises the thresholds.

Why National Insurance may differ from Income Tax

National Insurance is a separate payroll deduction. For most employees it is calculated for each employment and pay period, whereas Income Tax is based on taxable income and the PAYE code applied to the employment. This is why combining two salaries and applying one annual National Insurance calculation can give a misleading result.

Different category letters, directorship rules, irregular pay and earnings from more than one job can affect the amount deducted. Check the category letter shown on your payslip if your result differs materially from the category A estimate.

Using these rates in a salary estimate

Start with gross employment pay, add taxable bonus or overtime, then consider the treatment of pension contributions. Income Tax, National Insurance, student-loan deductions and other payroll items are calculated separately before arriving at take-home pay. Use the rates as a reference, not as a substitute for a full PAYE calculation.