What Is the UK’s Top Income Tax Rate?

Income tax in the United Kingdom is a levy on personal earnings, structured through a progressive system where the tax rate increases as income rises. This article will explore the highest rate of income tax, detailing who is liable to pay it and the methods used for its calculation.

UK Income Tax Rates and Thresholds

For the 2025-2026 tax year in England, Wales, and Northern Ireland, income tax is structured into several bands. The first £12,570 of income is typically tax-free, covered by the standard Personal Allowance. Income from £12,571 to £50,270 is taxed at the basic rate of 20%. The higher rate of 40% applies to incomes between £50,271 and £125,140. The top tier of taxation, the Additional Rate, is set at 45% for all income exceeding £125,140.

A feature for high earners across the UK is the tapering of the Personal Allowance. This reduction begins for individuals with a net adjusted income over £100,000. For every £2 of income earned above this threshold, the Personal Allowance is reduced by £1. Consequently, for individuals earning £125,140 or more, the Personal Allowance is reduced to zero, which creates an effective marginal tax rate of 60% on income between £100,000 and £125,140.

Scottish Income Tax Rates

Scotland employs a different set of income tax bands and rates for earned income. For the 2025-2026 tax year, after the standard £12,570 Personal Allowance, the structure is more graduated. The rates are as follows:

• Starter rate of 19% on income from £12,571 to £14,876.
• Basic rate of 20% on income from £14,877 to £26,561.
• Intermediate rate of 21% on income from £26,562 to £43,662.
• Higher rate of 42% for income between £43,663 and £75,000.
• Advanced rate of 45% on incomes from £75,001 to £125,140.

The highest band, the Top Rate, applies a 48% tax on all income over £125,140.

Taxation of Different Income Sources

The tax rates for dividend and savings income are distinct from those for earned income and apply uniformly across the UK. For additional rate taxpayers, those with income over £125,140, the tax on dividend income is 39.35%. This rate is applied to dividend income that exceeds the specific Dividend Allowance. For the 2025-2026 tax year, the tax-free Dividend Allowance is set at £500.

Savings income, such as interest from bank accounts, is also subject to specific tax rules. While basic and higher-rate taxpayers receive a Personal Savings Allowance, additional-rate taxpayers do not. This means that for individuals in the top income bracket, all savings income is taxable at their marginal income tax rate, which is 45%. The absence of a Personal Savings Allowance for this group means their interest earnings are taxed from the first pound.

National Insurance for High Earners

National Insurance Contributions (NICs) are another form of taxation on earnings. High-earning employees pay Class 1 NICs on their salary. On earnings between the primary threshold and the Upper Earnings Limit (£50,270 per year), employees pay a rate of 8%. For all earnings above this Upper Earnings Limit, the rate drops to 2%.

Self-employed individuals pay Class 4 contributions. For the 2025-2026 tax year, they pay 6% on profits between the Lower Profits Limit and the Upper Profits Limit (£50,270). On profits exceeding the Upper Profits Limit, the Class 4 NICs rate is 2%.

Paying Your Tax Through PAYE and Self Assessment

For most employees, income tax and National Insurance are collected through the Pay As You Earn (PAYE) system. Employers deduct these amounts directly from an employee’s salary each payday and pay them to HM Revenue and Customs (HMRC). The amount deducted is based on an individual’s tax code, which reflects their Personal Allowance and any other adjustments. For high earners, the tax code will be adjusted to reflect the tapered Personal Allowance once their income exceeds £100,000.

Individuals with complex tax affairs or an annual income over £150,000 are required to file a Self Assessment tax return. Filing is also required for those who receive significant untaxed income, such as from self-employment, property, or substantial dividends and savings. The deadline for registering for Self Assessment is 5th October after the end of the tax year for which you need to file. The deadline for online submission of the tax return and payment of any tax owed is 31st January of the following year.