In England, Wales and Northern Ireland you start paying 40% income tax on income above £50,270 in the 2026/27 tax year, if you have the standard £12,570 personal allowance. The 40% higher rate applies to income from £50,271 to £125,140, and only to the part of your income inside that band. Everything below it is still taxed at 0% and 20%. In Scotland the equivalent rate is 42% and starts at £43,663. The threshold is frozen by law for every tax year from 2022/23 to 2030/31, so it stays at this level until 5 April 2031, and each year more people's pay crosses it.
When do you start paying 40% tax?
The higher rate threshold is the personal allowance plus the basic rate band. The basic rate band is the first £37,700 of taxable income after the allowance, which gives £12,570 + £37,700 = £50,270. Income above that point is taxed at 40% (see HMRC's income tax rates).
| Band (England, Wales, NI) | Income | Rate |
|---|---|---|
| Personal allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
The threshold applies to your total taxable income, not only your salary. Rental profits, self-employed profits, pension income, taxable benefits in kind and, in the end, savings interest and dividends all count towards it. Someone with a £45,000 salary and £8,000 of rental profit is a higher rate taxpayer even though their payslip looks basic rate.
Being "in the 40% bracket" is not the same as paying 40% on everything
UK income tax is marginal. Each slice of income is taxed at its band's rate. Moving into the higher rate band does not raise the tax on the income below it.
Worked illustration (not an HMRC figure): on a £55,000 salary in England, £37,700 is taxed at 20% (£7,540) and the £4,730 above £50,270 is taxed at 40% (£1,892). That is £9,432 of income tax in total, an average rate of about 17% on the whole salary. Only the top £4,730 is "in the 40% bracket".
What else changes at the higher rate
Crossing £50,270 changes more than the income tax rate:
- National Insurance falls. Employee Class 1 drops from 8% to 2% above the upper earnings limit of £50,270. Self-employed Class 4 drops from 6% to 2% above the same figure. So an employee's combined marginal rate on earnings is usually 42%, not 48%;
- Personal savings allowance halves. It falls from £1,000 to £500 of tax-free interest;
- Dividends are taxed at 35.75%. This is the dividend upper rate for 2026/27, on dividends above the £500 allowance that fall in the higher band;
- Capital gains are taxed at 24%. This applies to gains that fall above the basic rate band, instead of 18%;
- Pension relief is not all automatic. Contributions to a relief-at-source scheme get 20% added by the provider. The extra 20% must be claimed through Self Assessment or from HMRC.
The high income child benefit charge does not start at the 40% threshold. It starts at adjusted net income of £60,000, recovers 1% of the child benefit for every £200 above that, and recovers all of it at £80,000.
The 40% bracket in Scotland
Scottish taxpayers pay a 42% higher rate from £43,663 to £75,000, and a 45% advanced rate from £75,001 to £125,140. These rates apply only to earnings, pensions and rental income. Savings and dividends are taxed at UK rates using the UK bands. National Insurance is UK-wide, so its 8% main rate continues up to £50,270. Illustration: between £43,663 and £50,270 a Scottish employee pays 42% income tax plus 8% National Insurance, a combined 50% on that slice. Our guide to Scottish tax bands sets out all six bands.
How to stay in the basic rate band (legitimately)
Two reliefs work by moving the band, not by reducing your income:
- Personal pension contributions. A contribution to a relief-at-source scheme extends your basic rate band by the gross contribution. Illustration: the £55,000 earner above could pay £3,784 net into a personal pension, which the provider grosses up to £4,730. All their income would then be taxed at no more than 20%, and they would claim the extra relief through their return;
- Gift Aid. Donations extend the basic rate band in the same way, by the grossed-up amount of the gift. See our guide to tax relief on charitable donations.
Salary sacrifice into an employer pension lowers your taxable pay itself, and saves National Insurance too. From April 2029, only the first £2,000 a year of sacrificed pension contributions will be exempt from National Insurance. The income tax treatment does not change. All pension saving remains subject to the £60,000 annual allowance, which is tapered for very high earners.
Check the timing. The bands apply to each tax year, so a bonus or a property sale that lands just after 5 April falls into a different year's calculation. Our year-end tax planning checklist covers what to review before the year closes.
What to check on your tax code and return
Employees on PAYE pay higher rate tax automatically through the tax code. Errors usually come from income outside payroll. If you have rental profit, self-employment, large savings interest or dividends above the allowance, you probably need to file a Self Assessment return, and the higher rate tax on that income is collected there. If your income is close to £100,000, read about the £100k tax trap. Above that point your personal allowance starts to be withdrawn and the effective rate rises to 60%.
For a broader view of how the bands fit together, see what income tax is and how it works. Acumon's tax planning team can model your position across the threshold, including pension and Gift Aid options. Our income tax return service makes sure any higher rate relief you are owed is actually claimed.