Personal Allowance & High Earner Tax (2025/26)

How much can I earn before paying tax in the UK (2025/26)?

Everyone gets a tax-free allowance of £12,570 in 2025/26.

This is the slice of income you can earn before paying any Income Tax.

What are the UK Income Tax bands for 2025/26?

After your allowance, your income is taxed in steps:

£0 – £12,570 → No tax (0%)

• £12,571 – £50,270 → 20% (Basic Rate)

• £50,271 – £125,140 → 40% (Higher Rate)

• Over £125,140 → 45% (Additional Rate)

👉 If you live in Scotland, the bands are different.

What happens if I earn over £100,000 in the UK?

This is where HMRC changes the rules.

• For every £2 you earn above £100,000, you lose £1 of your allowance.

• By the time you reach £125,140, your allowance is gone completely.

• That means all your income is taxable.

Do I lose my Personal Allowance if I earn more than £100k?

Yes. If you’re above £100,000, HMRC reduces it step by step until it disappears at £125,140.

Why do high earners face a 60% tax trap in the UK?

If you earn between £100k and £125k, you get hit twice:

1. Higher Rate Tax

You’re already in the 40% band.

2. Losing Your Allowance

HMRC is taking away your tax-free slice at the same time.

👉 Combined, this feels like an effective 60% marginal tax rate.

How can I reduce my tax bill if I earn over £100,000?

There are legal ways to bring your income down and preserve your allowance:

• Pension contributions.

• Gift Aid donations.

• Limited company structuring.

Bottom line: Who needs tax planning at £50k+?

First £12,570 → no tax.

• Over £50,270 → Higher Rate (40%).

• Over £100,000 → allowance starts shrinking.

• Over £125,140 → no allowance left at all.

👉 If you’re above £50k, tax planning isn’t optional — it’s essential.

References

This information has been collated using official guidance from HMRC.

Further Insight 📘

Want to see how this plays out in real life? We’ve put together a short case study so you can follow the numbers step by step. Read it here.