How marginal tax works
UK income tax is not one flat percentage. Your earnings are split into bands and each band is taxed at a different rate. Think of it like filling buckets in order — you only pay the higher rate on the portion of income that falls into that bucket.
| Band | Taxable income (2025/26) | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic Rate | £12,571 – £50,270 | 20% |
| Higher Rate | £50,271 – £125,140 | 40% |
| Additional Rate | Over £125,140 | 45% |
Worked example: £50,000 salary
Effective rate: ~15.0%. You keep roughly 85p in every £1 before NI.
Where do you sit?
UK earnings benchmarks (ONS ASHE 2024)
Median full-time
~£37,430
75th percentile
~£51,391
90th percentile
~£72,150
These are population-level benchmarks, not targets.
Your tax code matters
The most common tax code is 1257L, which tells your employer to give you the standard £12,570 Personal Allowance before deducting tax. If your code is wrong, you could be over- or under-paying tax every single month.
National Insurance
National Insurance (NI) is a separate deduction from income tax. Employees currently pay 8% on earnings between £12,570 and £50,270, then 2% above that. It funds state pension and benefits but is calculated independently of your tax code.
To see income tax and NI side by side, run your salary through our calculator.