Higher rate tax explained: what the 40% rate really means for you
One of the most common money worries is turning down a pay rise because it would "put you into the 40% bracket". It's a myth that this leaves you worse off. Here's how UK income tax bands actually work.
Tax bands are layers, not a switch
Income tax is charged in slices. For 2026/27 in England, Wales and Northern Ireland:
| Band | 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% |
Only the part of your income inside each band is taxed at that band's rate. If you earn £55,000, just the £4,730 above £50,270 is taxed at 40%. The rest is taxed exactly as it was before.
Marginal rate versus average rate
Your marginal rate is the tax on your next pound. Your average rate is your total tax divided by your total income.
On £60,000, your marginal rate is 40% income tax plus 2% National Insurance, but your total income tax is £11,432, an average of about 19%. Even including National Insurance, you keep about 76% of your salary overall.
A pay rise always leaves you better off
Going from £50,000 to £52,000 adds about £1,198 to your take-home pay. Going from £60,000 to £70,000 adds about £5,800. You never take home less because of a normal pay rise.
There are two exceptions where the effective rate gets painfully high, though you still keep something:
- £60,000 to £80,000 with Child Benefit. The High Income Child Benefit Charge claws back your Child Benefit in this range.
- £100,000 to £125,140. You lose £1 of tax-free allowance for every £2 you earn, creating an effective 60% rate. See the 60% tax trap.
Why National Insurance softens the jump
Above £50,270, employee National Insurance drops from 8% to 2%. So the combined rate on extra earnings goes from 28% to 42%, not from 28% to 48%.
Try it yourself
Put your current salary and the proposed one into the take-home pay calculator to see exactly what the rise is worth. Scotland has different bands, so the figures here don't apply there.