What is the 40% tax bracket?

What is the 40% tax bracket?

The 40% tax bracket is the higher rate of Income Tax in England, Wales and Northern Ireland. For the 2026/27 tax year, you pay it on taxable income between £50,271 and £125,140. Income Tax is the tax charged on earnings such as wages, self-employed profits and pensions.

The good news is that you never pay 40% on everything you earn. The higher rate only applies to the slice of your income above £50,270. Everything below that is taxed at lower rates, and the first £12,570 is usually tax free.

This guide explains how the 40% tax bracket works for 2026/27, why more people are being pulled into it, and the practical steps that can reduce your bill.

Source: Income Tax rates and Personal Allowances (GOV.UK)

What are the Income Tax bands for 2026/27?

The current tax year runs from 6 April 2026 to 5 April 2027. Most people get a Personal Allowance of £12,570. This is the amount you can earn each year before any Income Tax is due. Above that, income in England, Wales and Northern Ireland is taxed in three bands.

1. Personal Allowance: up to £12,570, taxed at 0%.
2. Basic rate: £12,571 to £50,270, taxed at 20%.
3. Higher rate: £50,271 to £125,140, taxed at 40%.
4. Additional rate: over £125,140, taxed at 45%.

Your Personal Allowance shrinks once your income passes £100,000. You lose £1 of allowance for every £2 of adjusted net income above that point, and the allowance disappears completely at £125,140. Adjusted net income means your total taxable income minus certain reliefs, such as pension contributions and Gift Aid donations. Because of this taper, the tax taken from income between £100,000 and £125,140 is unusually heavy, so planning matters most in that range.

Source: Income Tax rates and Personal Allowances (GOV.UK)

Do you pay 40% tax on all your income?

No. The 40% rate is a marginal rate. A marginal rate is the tax charged on your next pound of income, not on the whole amount. Only the portion of your income above £50,270 is taxed at 40%.

Take an illustrative example. Priya runs a small marketing consultancy in Wolverhampton and pays herself a salary of £60,000 in 2026/27. Her first £12,570 is covered by the Personal Allowance. The next £37,700 is taxed at 20%, which comes to £7,540. Only the final £9,730 falls into the 40% band, adding £3,892. Her total Income Tax is £11,432, which is roughly 19% of her whole salary. National Insurance is charged separately. This example is for illustration only, and your own position will depend on your circumstances.

Source: Income Tax rates and Personal Allowances (GOV.UK)

Is the 40% tax bracket different in Scotland?

Yes. Scotland sets its own rates and bands for income from work, self-employment, pensions and property. There is no 40% band. Instead, for 2026/27 a higher rate of 42% starts at £43,663, an advanced rate of 45% starts at £75,001, and a top rate of 48% applies above £125,140. Scottish taxpayers pay the same rates as the rest of the UK on savings interest and dividends.

Source: Income Tax in Scotland (GOV.UK)

Why are more people paying 40% tax?

The higher rate threshold has been frozen at £50,270 since April 2021. At the Autumn Budget in November 2025, the government extended the freeze for a further three years, to April 2031. The Personal Allowance is frozen for the same period.

Frozen thresholds pull more people into higher tax bands as wages rise. Economists call this fiscal drag. You can get a pay rise that only keeps up with inflation and still find part of your income newly taxed at 40%. The House of Commons Library reports that the extension alone is expected to bring around 700,000 more people into paying Income Tax by 2030/31.

Source: Income tax: freezing the personal allowance and the higher rate threshold (House of Commons Library)

What else changes when you enter the 40% tax bracket?

Crossing the threshold changes more than the rate on your salary. Your Personal Savings Allowance halves from £1,000 to £500. This is the amount of bank and building society interest you can receive each year without paying tax.

Source: Tax on savings interest (GOV.UK)

Dividends are taxed more heavily too. If you run a limited company and pay yourself in dividends, anything above the £500 dividend allowance is taxed at 35.75% in the higher rate band for 2026/27, compared with 10.75% at the basic rate.

Source: Tax on dividends (GOV.UK)

Parents should also watch the High Income Child Benefit Charge. It applies once the higher earner’s adjusted net income passes £60,000 and claws back 1% of Child Benefit for every £200 above that. The full benefit is withdrawn at £80,000. The charge is paid through a Self Assessment tax return or, for most employed people, through a PAYE tax code. PAYE, short for pay as you earn, is the system where tax is deducted from wages before you are paid.

Source: High Income Child Benefit Charge (GOV.UK)

How can you reduce your 40% tax bill?

Pension contributions are usually the most effective option. You get tax relief at your highest rate on contributions of up to 100% of your earnings, capped by the £60,000 annual allowance. In a relief at source scheme, your provider adds basic rate relief automatically, and as a higher rate taxpayer you claim the extra 20% through Self Assessment or directly from HMRC.

Source: Tax on your private pension contributions (GOV.UK)

Gift Aid donations to charity attract higher rate relief as well. Gift Aid lets the charity claim 25p from HMRC for every £1 you give. As a 40% taxpayer you can then personally claim back 20% of the grossed up donation, meaning your gift plus the tax the charity reclaims, either on your tax return or through your tax code.

Source: Tax relief when you donate to a charity (GOV.UK)

Moving savings and investments into an ISA protects the returns. An ISA, or Individual Savings Account, lets you save up to £20,000 in 2026/27, and you pay no tax on the interest, dividends or gains inside it. That matters more once your Personal Savings Allowance halves.

Source: Individual Savings Accounts (GOV.UK)

Finally, check your tax code. Your employer or pension provider uses this code to work out how much tax to take from your pay. You can find it on your payslip, in the HMRC app or in your online tax account. An out of date code is a common reason for paying too much or too little tax through the year.

Source: Tax codes (GOV.UK)

Frequently asked questions

When does the 40% tax bracket start in 2026/27?

In England, Wales and Northern Ireland it starts once your taxable income passes £50,270, assuming you have the standard Personal Allowance of £12,570. In Scotland, a 42% higher rate starts at £43,663 instead.

Can I claim Marriage Allowance as a higher rate taxpayer?

No. Marriage Allowance lets a low earning spouse or civil partner transfer £1,260 of their Personal Allowance, saving the couple up to £252 a year. The receiving partner must pay tax at the basic rate only, so the transfer stops being available once you pay 40% tax.

Source: Marriage Allowance (GOV.UK)

Do I need a Self Assessment tax return if I pay 40% tax?

Not automatically. Many higher rate taxpayers pay everything through PAYE. You may need a return if you owe the High Income Child Benefit Charge, have untaxed income, or want to claim higher rate relief on pension contributions or Gift Aid. HMRC can sometimes adjust your tax code instead.

What happens to my Personal Allowance above £100,000?

You lose £1 of allowance for every £2 of adjusted net income above £100,000, and it reaches zero at £125,140. Pension contributions and Gift Aid reduce adjusted net income, so they can restore some or all of the allowance.

Will the 40% threshold increase soon?

Not before April 2031 under current plans. The Autumn Budget 2025 froze the Personal Allowance and the higher rate threshold until then. Future Budgets could change this.

How WV4 Accountants can help

If your income is moving into the 40% tax bracket, small decisions on pensions, dividends and timing can make a real difference. WV4 Accountants can help you:

1. Review your salary, dividend and pension mix so you keep more of what you earn.
2. Prepare and file your Self Assessment tax return, including higher rate relief claims.
3. Check your tax code and deal with HMRC on your behalf.
4. Plan ahead of each tax year end so allowances are not wasted.

If you would like a clear picture of what the 40% tax bracket means for you, get in touch with WV4 Accountants for a friendly, no pressure conversation.

Important note: This article provides general information. Tax treatment depends on individual circumstances. Current HMRC guidance should be checked before action is taken.