Income Tax
Bands, allowances, how PAYE works, and Self Assessment — for the 2026-27 tax year, every figure cited to its source.
What it means
Income Tax is charged on your earnings above your Personal Allowance. If you're employed, it's deducted from your pay through PAYE before you receive it. If you're self-employed or have other untaxed income, you report it and pay it through Self Assessment.
Bands and rates, 2026-27
| Band | Taxable income | Rate |
|---|---|---|
| Personal Allowance | £0 – £12,570 | 0% |
| Basic rate | £12,570.01 – £50,270 | 20% |
| Higher rate | £50,270.01 – £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
Scotland has different bands and rates — see gov.uk/scottish-income-tax.
The taper trap
Your Personal Allowance shrinks once your adjusted net income passes £100,000: £1 lost per £2 of adjusted net income above, reaching £0 at £125,140. Inside that band, an extra £1 of income costs you 60% in combined tax — higher rate tax on the £1 itself, plus higher rate tax on the sliver of allowance it costs you.
What you must do
If you're employed with one job: nothing extra — PAYE handles it. Your tax code tells your employer how much pay is tax-free; the standard code for 2026-27 is 1257L(the Personal Allowance, divided by ten, plus a letter). If you're self-employed, or your trading or property income is above the relevant allowance below, you must register and file a Self Assessment return.
Register with HMRC by 5 October after the end of the tax year you need to report; file and pay by the following 31 January. See gov.uk/register-for-self-assessment. If you're mandated onto Making Tax Digital for Income Tax, the deadlines and penalty position are different in detail — see the MTD guide.
What you can safely skip
If you're employed with one job, no benefits, and no other income above the trading or property allowances below: you don't need to file a Self Assessment return. Check your tax code once a year — that's enough for most people on PAYE alone.
National Insurance for the self-employed
Class 4: 6% on profits between £12,570 and £50,270, 2% above that. Class 2 is treated as paid — for state pension purposes — once profits reach the £7,105 Small Profits Threshold; below it, voluntary Class 2 is available at £3.65 a week to protect your state pension record.
How to optimise
The £1,000 trading allowance and £1,000 property allowance let small amounts of trading or rental income go completely tax-free without declaring them — but you can claim the allowance or your actual expenses, never both. Pension contributions reduce your adjusted net income, which is the lever that matters most if you're inside the taper trap above.