What is the 40% Tax Bracket?- 2026

What is the 40% tax bracket?

The 40% tax bracket is the band of income taxed at the higher rate of 40%. For 2026/27, it applies to taxable income between £50,271 and £125,140 in England, Wales, and Northern Ireland.

Income tax in the UK works in layers. Each layer, or band, carries its own rate, and you move through them as your income grows. Here are the bands for 2026/27:

The key point is that you pay 40% only on the income that sits inside the higher rate band. Everything below £50,270 is taxed at the basic rate or falls within your tax-free personal allowance. So earning into the higher rate does not suddenly tax your entire salary at 40%.

If you live in Scotland, different bands and rates apply. We cover those separately below.

How much can you earn before you pay 40% tax?

In 2026/27 you can earn up to £50,270 before any of your income is taxed at 40%. Once your total taxable income passes that figure, only the part above it is taxed at the higher rate.

This £50,270 point is called the higher rate threshold. It is made up of two things: your £12,570 personal allowance and the £37,700 basic rate band. Add them together and you reach £50,270.

A few things can shift where that threshold effectively sits for you. Pension contributions and Gift Aid donations, for example, can extend your basic rate band, which lets you earn a little more before the 40% rate bites. On the other hand, income above £100,000 reduces your personal allowance, which we explain shortly.

How the 40% rate works: a worked example

Because the 40% rate is marginal, it only ever touches the slice of income above £50,270. The example below shows this clearly.

Take someone earning £60,000 in 2026/27:

So a £60,000 earner pays 40% on just £9,730, which comes to £3,892. The total income tax bill is £11,432. Across the whole salary, that works out at an effective rate of around 19%, not 40%.

This is why crossing into the higher rate does not cut your pay in the way many people fear. You keep 60p of every extra pound in that band, and every pound below the threshold is still taxed at the lower rates.

This example covers income tax only. National Insurance, the student loan repayments, and other deductions are separate and would change your final take-home figure.

What is a marginal tax rate?

Your marginal tax rate is the rate you pay on your next pound of income. It is not the rate you pay on everything you earn.

Because the system is banded, only the portion of income that reaches into a higher band is taxed at that band’s rate. In the example above, the person’s marginal rate is 40%, since their next pound of earnings sits in the higher rate band. Their average rate across all their income, however, is far lower.

When you weigh up a pay rise, a bonus, or extra freelance work, the marginal rate tells you how much of that new money you actually keep.

The £100,000 trap and the 60% effective rate

There is one point in the higher rate band that catches many people out. Once your income passes £100,000, your personal allowance is gradually withdrawn. For every £2 you earn above £100,000, you lose £1 of allowance. By £125,140, the allowance has gone entirely.

The effect is that income between £100,000 and £125,140 is taxed at 40%, while at the same time you lose the tax-free benefit of part of your allowance. Combined, this creates an effective marginal rate of around 60% on that slice of income. This is often called the “60% tax trap”.

If your income sits near this range, pension contributions and Gift Aid can be especially useful, because they reduce your adjusted net income and can help you reclaim some of that allowance. Given the sums involved, this is an area where professional advice usually pays for itself.

What else changes when you become a higher-rate taxpayer

Reaching the higher rate affects more than the tax on your salary. Several other allowances and charges shift at or near this point.

• Your personal savings allowance falls. Basic rate taxpayers can earn £1,000 of savings interest tax-free. As a higher-rate taxpayer, that drops to £500. Additional rate taxpayers get nothing.
• The High Income Child Benefit Charge may apply. If you or your partner claims Child Benefit and the higher earner has an adjusted net income above £60,000, some of it is clawed back. The charge is 1% of the Child Benefit for every £200 of income above £60,000, and it reaches 100% once income hits £80,000.
• Pension tax relief is more valuable. Higher-rate taxpayers can claim relief at 40% on eligible pension contributions, though part of this may need to be claimed through Self Assessment.
• Dividends and savings have their own rules. These are taxed under separate rates and allowances, so it is worth checking the current figures on GOV.UK if a large part of your income comes from investments.

Will the 40% tax bracket change?

The thresholds are frozen. At the Autumn Budget 2025, the government confirmed that the personal allowance and the higher rate threshold will stay at their current levels until April 2031, after which they are due to rise in line with inflation.

Because pay tends to increase while the bands stay fixed, more people are pulled into the higher rate each year without any change to the headline rate. This effect is known as fiscal drag, and it means the 40% band now affects a much wider group of workers than it once did.

Thresholds can still change in future Budgets, so it is sensible to check the latest position before making decisions based on where you sit.

The 40% rate in Scotland

Scotland sets its own income tax bands and rates for earned income. It has more bands than the rest of the UK, and the closest equivalent to the 40% higher rate is charged at 42%.

The exact thresholds differ from those in England, Wales, and Northern Ireland. If you are a Scottish taxpayer, use the current Scottish rates rather than the figures in this guide.

How to reduce the tax you pay at the higher rate

You cannot opt out of the higher rate, but there are legitimate ways to reduce the amount of income taxed at 40%. Each of these works by lowering your taxable or adjusted net income.

• Pension contributions. Paying into a pension attracts tax relief and can extend your basic rate band, which reduces the income taxed at 40%.
• Gift Aid donations. Like pension contributions, these can extend your basic rate band and cut your adjusted net income.
• Salary sacrifice. Exchanging part of your salary for pension contributions or certain benefits lowers your taxable pay, though the rules are specific and depend on your employer’s scheme.
• ISAs. Interest, dividends, and gains inside an ISA are sheltered from further tax, which is useful once your savings and dividend allowances are reduced.
• Spousal planning. Couples can sometimes make better use of two sets of allowances and basic rate bands, depending on their circumstances.

These are general strategies, not recommendations. The right approach depends entirely on your income, your goals, and your wider financial position. Aggressive schemes designed only to sidestep tax carry real risk and should be avoided. Before acting, speak to a qualified accountant or regulated financial adviser.

Common mistakes to avoid

• Assuming 40% applies to your whole salary. It applies only to the income above £50,270.
• Turning down a pay rise to stay in the basic rate. Except in specific taper situations, you always keep more overall after a rise.
• Ignoring the £100,000 allowance taper. Missing this can leave you paying an effective 60% on part of your income.
• Forgetting the Child Benefit charge. Higher earners often overlook this and face an unexpected bill.
• Not claiming higher-rate pension relief. Some of this must be claimed through Self Assessment and is easily missed.