Income tax is charged on an individual’s income after deducting personal allowances. Different types of income are taxed in a specific order, with non-savings income taxed first, followed by savings income and then dividend income.
Savings and dividend income that fall within their respective allowances are still included when calculating total income, even though they may be taxed at 0%.
The starting rate band applies only to savings income. This 0% rate is not available if taxable non-savings income exceeds the starting rate band.
Income tax rules vary slightly depending on whether a taxpayer is resident in England, Scotland, or Wales.
Income Tax Rates 2025/26 (UK – England & Northern Ireland)
| Type | Band of taxable income (£) | Rate (%) | Rate if dividends (%) |
|---|---|---|---|
| Basic rate | 0 - 37,700 | 20 | 8.75 |
| Higher rate | 37,701 - 125,140 | 40 | 33.75 |
| Additional rate | Over 125,140 | 45 | 39.35 |
Scottish Income Tax Rates 2025/26 (Non-savings and non-dividend income only)
| Type | Band of taxable income (£) | Rate (%) |
|---|---|---|
| Starter rate | 0 - 2,827 | 19 |
| Basic rate | 2,828 - 14,921 | 20 |
| Intermediate rate | 14,992 - 31,092 | 21 |
| Higher rate | 31,093 - 62,430 | 42 |
| Advanced rate | 62,431 - 125,140 | 45 |
| Top rate | Over 125,140 | 48 |
Savings and dividend income for Scottish residents is taxed using UK rates and bands.
Welsh Income Tax Rates 2025/26 (Non-savings and non-dividend income)
Welsh taxpayers pay income tax made up of UK rates plus a Welsh rate:
| Band of taxable income (£) | UK Rate (%) | Welsh Rate (%) | Overall Rate (%) |
|---|---|---|---|
| 0 - 37,700 | 10 | 10 | 20 |
| 37,701 - 125,140 | 30 | 10 | 40 |
| Over 125,140 | 35 | 10 | 45 |
Savings and dividend income is taxed using UK rates.
Savings Allowance:
| Band of taxpayer | Amount (£) | Rate (%) |
|---|---|---|
| Basic rate | 1,000 | 0 |
| Higher rate | 500 | 0 |
| Additional rate | 0 | N/a |
Dividend Allowance:
| Band of taxpayer | Amount (£) | Rate (%) |
|---|---|---|
| All | 500 | 0 |
A personal allowance allows a certain amount of income to be received tax-free each year.
Personal allowance (2025/26 & 2024/25): £12,570
The personal allowance is reduced by £1 for every £2 of adjusted net income over £100,000.
Once income reaches £125,140, the personal allowance is fully withdrawn.
Allows 10% of the personal allowance (£1,260) to be transferred between spouses or civil partners.
Available only if neither partner pays tax above the basic rate.
Not available to couples entitled to the Married Couple’s Allowance.
2025/26: £3,130
2024/25: £3,070
This allowance is added to the personal allowance.
Maximum tax reduction 2025/26: £1,127
Minimum tax reduction 2025/26: £436
Income limit: £37,700
The allowance is reduced by £1 for every £2 of adjusted net income above the income limit.
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