When Do You Start Paying 40% Tax in the UK? (2025-26)
In England, Wales, and Northern Ireland, you enter the 40% Higher Rate income tax bracket when your taxable income exceeds £50,270 in 2025-26. In Scotland, the equivalent threshold (where a 42% Higher Rate begins) is £43,663.
The key thresholds
| Nation | Higher Rate starts at | Rate |
|---|---|---|
| England, Wales, NI | £50,271 | 40% |
| Scotland | £43,663 | 42% |
Taxable income means your gross income minus your Personal Allowance (£12,570). A gross salary of £62,840 puts you exactly at the Higher Rate threshold in England (£62,840 minus £12,570 = £50,270 taxable).
The most common misconception
Entering the 40% bracket does NOT mean all your income is taxed at 40%. Only the income above the threshold is taxed at the higher rate. Everything below £50,270 (above the Personal Allowance) continues to be taxed at 20%. This is how marginal tax rates work.
Example: if you earn £55,000, only £4,730 (£55,000 minus £50,270) is taxed at 40%. The remaining taxable income (£12,571–£50,270) is still taxed at 20%. Your overall effective tax rate will be well below 40%.
How to avoid crossing the threshold
If your income is close to £50,270, pension contributions are the most effective way to reduce your adjusted net income. A salary sacrifice pension contribution reduces your gross pay for tax purposes, potentially keeping you within the Basic Rate band and saving 20% on every pound contributed above the threshold.
The £100,000 trap: Personal Allowance withdrawal
A separate — and often overlooked — high-rate effect occurs at £100,000. The Personal Allowance reduces by £1 for every £2 of income above £100,000, creating an effective marginal tax rate of 60% on income between £100,000 and £125,140 as both income tax and the loss of the allowance combine. This is entirely separate from the 40% threshold.
Frequently asked questions
Does the 40% rate apply to my bonus?
If your total income including the bonus takes you above £50,270, the portion above the threshold is taxed at 40%. HMRC calculates this on an annualised basis through PAYE.
What about National Insurance at higher incomes?
NI drops from 8% to 2% above £50,270 — meaning the combined marginal rate above the threshold is 42% (40% IT + 2% NI), not 48%.