The 40% tax bracket, properly called the higher rate, applies to taxable income between £50,271 and £125,140 in England, Wales and Northern Ireland for the 2026/27 tax year. If your taxable income falls in this range, the portion within it is taxed at 40%.
It is easy to hear ‘40% tax bracket’ and picture 40% being taken off everything you earn. That is not how it works. The 40% rate only applies to the slice of income that sits inside the band, not to your whole income.
Source: Income Tax rates and Personal Allowances (GOV.UK)
What are the UK income tax bands for 2026/27?
For most people in England, Wales and Northern Ireland, taxable income for 2026/27 is split into four bands:
- Personal Allowance: up to £12,570, taxed at 0%
- Basic rate: £12,571 to £50,270, taxed at 20%
- Higher rate: £50,271 to £125,140, taxed at 40%
- Additional rate: over £125,140, taxed at 45%
These figures assume you get the standard Personal Allowance. If your income is over £100,000, your allowance reduces, which we cover below.
Source: Income Tax rates and Personal Allowances (GOV.UK)
How does the 40% rate actually work in practice?
Income Tax in the UK is a marginal system. Each pound of your income is taxed according to which band it falls into, working up through the bands in order. Nobody pays 40% on their entire income just for tipping over the higher rate threshold.
Say your taxable income for the year is £65,000. The first £12,570 is tax-free. The next slice, from £12,571 to £50,270, is taxed at 20%. Only the remaining £14,730, the amount above £50,270, is taxed at 40%. Your average tax rate across the whole £65,000 works out lower than 40%, even though part of your income is taxed at that rate.
Why does my Personal Allowance shrink above £100,000?
Once your adjusted net income passes £100,000, your Personal Allowance is reduced by £1 for every £2 above that threshold. By the time your income reaches £125,140, the allowance has gone completely.
This creates an awkward stretch between £100,000 and £125,140. For every extra £2 you earn in this band, you pay 40% tax on it as normal, and you also lose £1 of tax-free allowance, which then gets taxed at 40% too. Add it up and the effective rate on income in this stretch works out at 60%, even though no such rate appears on the official tax table. Pension contributions and Gift Aid donations both reduce your adjusted net income, which is one way people bring their income back under £100,000 and restore some or all of their allowance.
Source: Income Tax rates and Personal Allowances (GOV.UK)
Source: Personal Allowances: adjusted net income (GOV.UK)
Is the 40% threshold going to change?
Not for a while. The government has frozen the Personal Allowance at £12,570 and the higher rate threshold at £50,270 since 2021, and confirmed at the Autumn Budget 2025 that both will stay at these levels until 5 April 2031.
Freezing a threshold rather than raising it with inflation still has a real effect. As wages rise each year, more of your income sits above a threshold that is not moving, so more people drift into the higher rate over time. This is often called fiscal drag.
Does the 40% band apply if I live in Scotland?
No, not as such. Scotland sets its own Income Tax bands for wages, pensions and most other income, and 40% is not one of its rates. For 2026/27, Scotland has six bands running from a 19% starter rate up to a 48% top rate, with a 42% higher rate starting at £43,663, well below the £50,270 point where the rest of the UK’s 40% band begins.
Dividends and savings interest are the exception. Scottish taxpayers pay the same rates on these as everyone else in the UK, regardless of which Scottish band their other income falls into.
Source: Income Tax in Scotland (GOV.UK)
A worked example
Say Daniel runs a sole trader landscaping business and expects taxable profits of £58,000 for the year. After his £12,570 Personal Allowance, £37,700 of his profit falls in the basic rate band and is taxed at 20%, coming to £7,540. The remaining £7,730 sits in the higher rate band and is taxed at 40%, coming to £3,092. His total Income Tax bill for the year is £10,632, an average rate of around 18% of his total profit, even though part of it was taxed at 40%. This example is illustrative only. Every business’s tax position depends on its own income, expenses and reliefs, and it is not a guarantee of any particular result.
How can I manage moving into the 40% bracket?
There is no way to opt out of the higher rate once your income crosses the threshold, but there are legitimate ways to manage how much of your income sits above it.
- Pension contributions: money paid into a pension reduces your adjusted net income. If you pay Income Tax above 20%, you may need to claim the extra relief yourself through Self Assessment rather than assume it happens automatically.
- Gift Aid donations: as a higher rate taxpayer, you can claim back the difference between the 40% rate and the 20% the charity has already reclaimed, again usually through your Self Assessment return.
- ISAs: interest and dividends earned inside an ISA are tax-free and do not use up your other allowances, so they do not push more of your income into the higher rate.
- Salary sacrifice: some employers let you exchange part of your salary for benefits such as extra pension contributions, which lowers your taxable pay directly.
Source: Tax on your private pension contributions (GOV.UK)
Source: Tax relief when you donate to a charity: Gift Aid (GOV.UK)
Frequently asked questions
Does the 40% rate apply to my whole income once I earn over £50,270?
No. Only the portion of your taxable income above £50,270 is taxed at 40%. Everything below that point is still taxed at 0% or 20%, as normal.
What counts towards the £50,270 threshold?
Your total taxable income counts, including salary, self-employment profits, rental income, pension income and most other earnings, added together before working out which bands they fall into.
Do dividends get taxed at 40% too?
No. Dividends have their own rates, which are lower than the main Income Tax rates. From 6 April 2026, the higher rate on dividends is 35.75%, up from 33.75%, applying to dividend income that falls within the higher rate band.
Can pension contributions bring me back under the 40% threshold?
Pension contributions reduce your adjusted net income and effectively extend your basic rate band, which can reduce how much of your income is taxed at 40% for that year.
Will the higher rate threshold ever go back to rising with inflation?
The legislative default is for it to do so, but the government has repeatedly extended the freeze, most recently to 5 April 2031. Whether it rises after that will depend on future Budget decisions.
How SuperFiler can help
Moving into the 40% tax bracket, or sitting close to it, is exactly the point where good planning makes the biggest difference to what you actually keep. SuperFiler can help you approach it with a clear plan rather than guesswork.
- Reviewing your income across employment, self-employment, property and dividends to see where you sit against the thresholds.
- Making sure pension and Gift Aid relief you are entitled to is actually being claimed, not left on the table.
- Planning around the £100,000 to £125,140 Personal Allowance taper if it affects you.
- Structuring salary and dividends efficiently if you run your own limited company.
If you would like a clear picture of how the 40% tax bracket affects your own income, get in touch with SuperFiler and we will talk it through with you.
Important note: This article provides general information. Tax treatment depends on individual circumstances. Current HMRC guidance should be checked before action is taken.
