UK income tax and National Insurance
The UK system has one feature that catches almost everyone: the personal allowance is withdrawn at £1 for every £2 of income above £100,000, which creates an effective 60% marginal rate over a band that no headline rate mentions. That is why a pay rise between £100,000 and £125,140 can leave someone barely better off.
| Line | Amount | Note |
|---|---|---|
| Gross salary | £60,000 | as entered |
| Personal allowance | £12,570 | full allowance |
| Taxable income | £47,430 | gross less the allowance |
| Income tax | £11,432 | Higher |
| National Insurance | £3,211 | on gross, not taxable |
| Pension contribution | £2,202 | 5.0% of qualifying earnings |
| Student loan | £0 | none |
| Take-home | £43,156 | after every deduction |
| Employer cost | £61,321 | including the employer pension |
The effective rate on the whole salary is 28.1%, and the next pound is taxed at 42%.
12,570 − (income − 100,000)/2 · Floored at zero.
20% / 40% / 45% by band · Scottish bands differ.
8% to 50,270, then 2% · On gross pay.
band + NI + 0.5 × band · The taper term.
A clear path from inputs to results.
The UK system has one feature that catches almost everyone: the personal allowance is withdrawn at £1 for every £2 of income above £100,000, which creates an effective 60% marginal rate over a band that no headline rate mentions.
How to use
- Enter the gross salary.
- Set the pension contribution and the employer rate.
- Choose a student loan plan if you have one.
- Read the take-home, the marginal rate and the employer cost.
The formula
Reference: HMRC income tax rates and allowances 2025/26; NI Class 1 employee contributions; Pensions Act 2008 automatic enrolment.
Worked example
A £60,000 salary
- £60,000 gross, 5% employee pension, 3% employer.
- No student loan, not Scottish.
- 1
The personal allowance is the full £12,570, so taxable income is £47,430.
- 2
Tax is 20% on £37,700 (£7,540) plus 40% on £9,730 (£3,892), or £11,432.
- 3
NI is 8% on £37,700 (£3,016) plus 2% on £9,730 (£194.60), or £3,210.60.
- 4
The pension is 5% of £44,030 of qualifying earnings, or £2,201.50.
- 5
Take-home is £43,156, and the next pound is taxed at 42%.
£11,432 tax · £3,211 NI · £43,156 net.
Interpreting the result
The marginal rate matters more than the average one for any decision — a pay rise, a bonus, a pension contribution. Between £100,000 and £125,140 the marginal rate is 62%, which is higher than the 47% at the top of the scale, and that is the single most useful thing this page shows.
Assumptions & limitations
- England, Wales and Northern Ireland rates; Scotland differs.
- Class 1 employee NI, not the employer contribution.
- Pension is the employee share of the automatic-enrolment minimum.
- No salary sacrifice, benefits in kind or marriage allowance.
Frequently asked questions
Why is the marginal rate 62% between £100,000 and £125,140?
Because each extra £2 of income costs £1 of personal allowance, which is taxed at 40% — so the effective rate is 40% on the income plus 20% from the lost allowance, plus 2% NI.
What is different in Scotland?
Five bands instead of three, with a 19% starter rate and a 48% top rate. The personal allowance and NI are the same.
How does the student loan repayment work?
It is 9% of income above the plan threshold, deducted through PAYE like tax, and it is not a tax — it stops when the balance is repaid.
Does salary sacrifice help?
Yes, and more than a net-pay contribution: it reduces gross pay, so it saves NI as well as income tax. A £1,000 sacrifice in the taper band saves £620.
Is the personal allowance the same for everyone?
No — it is reduced for income over £100,000, and it is transferable between spouses under the marriage allowance where neither pays above the basic rate.
Methodology last reviewed 2026-10-22. Results are informational and not financial or engineering advice — see our disclaimer.