The core 40% income tax rate in the UK applies to the portion of your taxable income that falls within the higher-rate band for the current tax year. Direct answer
- For most of the 2025/26 tax year, the higher-rate (40%) starts on taxable income above £50,270 and applies up to £125,140. Income above £125,140 is taxed at the additional rate (45%). In practice, this means only the portion of your income above £50,270 is taxed at 40%, not your entire income. This threshold is the same as in preceding years, though the exact figures can be adjusted by HMRC in subsequent years.
Key points to understand
- What counts as taxable income: salary, wages, self-employment profits, most benefits in kind, and other earned income after allowable deductions and reliefs. Some types of income (e.g., certain pensions, investments) may have specific rules, but typically count toward the taxable income that sits within bands.
- Personal allowance interaction: the Personal Allowance (the amount you can earn tax-free) is £12,570 for many taxpayers in recent years, and it reduces if your income exceeds £100,000. This interacts with where you land in the bands, effectively shifting the point at which higher-rate taxes apply.
- Scottish rates differ: Scotland uses a different set of bands; the 40% “Higher” rate in Scotland starts at a different income level (and includes a 42% higher-rate threshold for some bands). If you reside in Scotland, your thresholds may differ from the rest of the UK.
Common real-world implications
- You’re not taxed at 40% on all your income the moment you exceed £50,270; only the income above that threshold is taxed at 40% (until you reach £125,140, after which the 45% rate applies). This can influence how bonuses, additional income, or windfalls affect your overall tax dent.
- There are legitimate ways to manage or reduce your tax bill, such as making pension contributions, utilizing allowable reliefs and allowances, or investing in tax-efficient accounts. It’s worth reviewing your situation if you’re near or within the higher-rate band.
If you’d like, share your approximate taxable income (or a breakdown of income types), and I can help estimate how much tax would be due in the 2025/26 year and how close you might be to the higher-rate threshold.
