Question 1

How much income tax do I pay in the UK?

Accepted Answer

In 2026/27, the first £12,570 of your income is tax-free (the Personal Allowance). You then pay 20% on income up to £50,270 (basic rate), 40% on income between £50,271 and £125,140 (higher rate), and 45% above £125,140 (additional rate). If your income exceeds £100,000, you also lose £1 of Personal Allowance for every £2 earned above that threshold, creating an effective 60% rate on that slice.

Question 2

How much National Insurance do I pay?

Accepted Answer

As an employee in 2026/27, you pay 8% National Insurance on earnings between £12,570 and £50,270, and 2% on earnings above £50,270. For example, on a £35,000 salary you pay 8% on £22,430 (£35,000 minus the £12,570 threshold), which is £1,794 per year. NI is calculated separately from income tax.

Question 3

What is the UK personal allowance for 2026/27?

Accepted Answer

The standard Personal Allowance is £12,570 for 2026/27 — unchanged since 2021/22. You pay no income tax on the first £12,570 of your income. If you earn over £100,000, the allowance is reduced by £1 for every £2 of income above £100,000, and disappears entirely at £125,140.

Question 4

How do pension contributions reduce my tax bill?

Accepted Answer

Pension contributions are made before income tax is applied, reducing your taxable income. A basic rate taxpayer gets 20% relief — a £1,000 pension contribution costs £800 from take-home pay. Higher rate taxpayers get 40% relief (£1,000 costs £600). Salary sacrifice also saves National Insurance, making it even more effective. Contributions can also reduce your Adjusted Net Income below key thresholds like £60,000 (HICBC) or £100,000 (Personal Allowance taper).

Question 5

What is the 60% tax trap?

Accepted Answer

Between £100,000 and £125,140, you lose £1 of Personal Allowance for every £2 earned. This means every £2 of income is taxed at 40%, plus you lose £1 of allowance which would otherwise have been tax-free at 40%. The combined effect is an effective marginal rate of 60% — higher than the 45% additional rate that kicks in above £125,140. The solution is to make pension contributions to bring your Adjusted Net Income below £100,000.

Question 6

How are student loan repayments calculated?

Accepted Answer

Student loan repayments are 9% of your income above the repayment threshold (Plan 1: £26,900; Plan 2: £29,385; Plan 5: £25,000; Plan 4: £33,795), or 6% for Postgraduate loans. They are collected through PAYE alongside tax and NI. For example, on a £35,000 salary with a Plan 2 loan, you repay 9% × (£35,000 − £29,385) = £505 per year. Repayments are calculated on gross income before pension contributions.

Income tax calculator: how it works

How much Income Tax will I pay?

National Insurance and student loan deductions