When Do You Pay 40% Tax? The £50,270 Threshold Explained

In England, Wales and Northern Ireland you start paying 40% tax once your taxable income passes £50,270 in the 2026/27 tax year. Only the income above that line is taxed at 40% — everything below it is still taxed at 0% or 20%. In Scotland the equivalent line is lower: the Scottish higher rate of 42% begins at £43,662 of non-savings income.

• The 40% tax threshold is £50,270 = the £12,570 Personal Allowance plus the £37,700 basic-rate band.
• Crossing it does not re-tax your whole salary. A £51,000 earner pays 40% on £730, not on £51,000.
• National Insurance drops from 8% to 2% at the same point, so the combined marginal rate only moves from 28% to 42%.
• Your Personal Savings Allowance halves to £500 and dividend tax jumps from 10.75% to 35.75% once you are a higher-rate taxpayer.
• The threshold has been frozen for years, so pay rises drag more people over it — that's fiscal drag.

Where 40% starts in 2026/27

The 40% rate does not have its own standalone number written into the tax tables. It is the point where your tax-free allowance and your basic-rate band both run out:

• Personal Allowance: £12,570 (taxed at 0%)
• Basic-rate band: the next £37,700 (taxed at 20%)
• £12,570 + £37,700 = £50,270 — the higher rate threshold

Above £50,270, income is taxed at 40% until £125,140, when the additional rate of 45% takes over.

One important caveat: £50,270 applies to taxable income, not gross pay. If you pay into a workplace pension through a net pay or salary sacrifice arrangement, those contributions come off before tax is worked out, so your taxable income is lower than your headline salary. Someone on £53,000 paying 5% into a net pay pension scheme has taxable pay of £50,350 — barely into 40% territory. The full band structure, including how the allowance is tapered above £100,000, is set out in our guide to UK income tax rates and bands for 2026/27.

If your Personal Allowance is not £12,570

The £50,270 figure assumes a standard allowance. Your own 40% starting point shifts if:

• you earn over £100,000 — the allowance tapers away by £1 for every £2 of income, creating an effective 60% marginal rate between £100,000 and £125,140;
• you have claimed Marriage Allowance as the receiving partner, or transferred £1,260 of your allowance away;
• you receive Blind Person's Allowance of £3,070, which pushes your 40% start point up;
• you have taxable benefits in kind (a company car, medical cover) coded into your tax code, which effectively reduce your allowance.

Only the income above the line is taxed at 40%

This is the single biggest misunderstanding about the higher rate threshold. Crossing £50,270 does not apply 40% to your whole income — it applies 40% to the slice above it only.

Worked example: a £56,000 salary

1. Income £56,000, less Personal Allowance £12,570 = taxable income £43,430.
2. First £37,700 at 20% = £7,540.
3. Remaining £43,430 − £37,700 = £5,730 at 40% = £2,292.
4. Total income tax = £9,832.

National Insurance is worked out separately: 8% on earnings between £12,570 and £50,270 (£37,700 × 8% = £3,016), then 2% on the £5,730 above the Upper Earnings Limit (£114.60). Total NI £3,130.60.

So on £56,000, the 40% rate costs £2,292 — an average income tax rate of 17.6% across the whole salary. The scary marginal rate applies to a small slice.

What actually changes when you cross £50,270

The 40% rate is only part of the story. Several other rules use "higher-rate taxpayer" as their trigger, and they often cost more than the extra income tax itself.

Two of these deserve attention. First, savings interest: the Personal Savings Allowance halves to £500, so a saver with £1,000 of interest who was paying nothing now pays 40% on £500 — £200. Second, dividends: a company director taking £20,000 of dividends sees the rate on the slice above the higher rate threshold rise from 10.75% to 35.75%.

There is also the High Income Child Benefit Charge, which is a separate threshold entirely. It starts at £60,000 of adjusted net income and claws back all Child Benefit by £80,000. Between those points, a family with two children faces a combined marginal rate far above 40%.

Pay rises, bonuses and second jobs

Because the change is at the margin, the practical question is usually "how much of my rise or bonus do I actually keep?"

A pay rise that straddles the threshold

Take a rise from £48,000 to £54,000 in England — £6,000 gross.

• £2,270 of it falls below £50,270: taxed at 20% + 8% NI = 28%. You keep £1,634.40.
• £3,730 falls above £50,270: taxed at 40% + 2% NI = 42%. You keep £2,163.40.
• Total kept: £3,797.80 of £6,000 (63%).

Add a Plan 2 student loan at 9% and auto-enrolment pension contributions and the take-home share falls further. Our pay rise tax trap calculator shows the net effect of a specific rise on your own figures.

Bonuses

A bonus is taxed as ordinary earnings in the month it is paid. On a £49,000 salary, a £5,000 bonus splits the same way: £1,270 at 28% and £3,730 at 42%, leaving roughly £3,078. PAYE sometimes over-deducts in the bonus month because the payroll system annualises that month's pay; this usually corrects itself over the following months, and any remaining overpayment is refunded after the tax year ends.

Second jobs

A second job does not have its own Personal Allowance. Your allowance normally sits with your main job, and the second employer uses a BR code (all income at 20%) or a D0 code (all income at 40%) if your combined income puts you into the higher rate. If the codes are wrong, you either underpay and get a bill, or overpay and wait for a refund — which is why checking your tax code matters most in the year you cross the threshold.

The frozen threshold and fiscal drag

The £50,270 higher rate threshold has not moved since April 2021, and the Personal Allowance has been £12,570 for just as long. Neither is rising with inflation or wages, so every pay rise pushes a slightly larger share of earnings into the higher band. That is fiscal drag: the rates never change, but the tax take grows.

The practical effect is that a job which paid comfortably within the basic rate a few years ago can now trip into 40%, and people who have never had to think about savings tax, dividend tax or claiming higher-rate pension relief suddenly do. The freeze is currently expected to run to April 2031.

Staying below the 40% tax threshold

Only two things move the line: reducing your taxable income, or increasing your allowances. The main levers, all of which reduce the income HMRC measures against £50,270:

• Pension contributions. A contribution reduces the income taxed at 40%. On a £56,000 salary, a £5,730 gross contribution brings taxable income down to exactly £50,270 and attracts 40% relief — £2,292. Under relief at source you pay £4,584 net, the scheme adds £1,146 of basic-rate relief, and you claim the remaining £1,146 back from HMRC. The annual allowance is £60,000.
• Gift Aid donations. These extend your basic-rate band by the gross donation, so a £100 donation (£125 gross) shifts £125 of income out of 40%, worth £25 to you.
• Salary sacrifice. Sacrificing salary for pension, cycle-to-work or an electric car reduces gross pay before tax and NI are applied.
• Timing. Where you have control — a bonus, a dividend, a disposal — which tax year it falls into changes which band it lands in.
• ISAs. Interest and dividends inside an ISA never count, which protects you from the halved £500 Personal Savings Allowance.

Which of these is worth doing depends on how far over the line you are and whether the money is needed now or later. Our guide to deciding how to reduce higher-rate tax walks through the trade-offs side by side.

Scotland: 42% from £43,662

Scottish taxpayers do not have a 40% band at all on earnings. Scottish income tax rates apply to non-savings, non-dividend income — salary, self-employment profits, pensions and rent — and the bands are:

With a standard allowance, the Scottish higher rate of 42% starts at £43,662 (£12,570 + £31,092) and the advanced rate of 45% starts at £75,000.

The awkward consequence is the band between £43,662 and £50,270. National Insurance is set UK-wide, so a Scottish employee in that range pays 42% income tax and 8% NI — a 50% marginal rate on each extra pound, higher than the 42% faced above £50,270.

Using the same £56,000 salary, Scottish income tax works out at £753.73 (19%) + £2,597.80 (20%) + £2,968.56 (21%) + £5,181.96 (42%) = £11,502.05, about £1,670 more than the £9,832 due in England on the same pay.

£50,270 still matters in Scotland, though. It sets the Upper Earnings Limit for NI, and because savings interest, dividends and capital gains are taxed using UK-wide rates and bands, it determines whether your Personal Savings Allowance is £1,000 or £500 and whether dividends are taxed at 10.75% or 35.75%.

What to do next

If you are close to the line, work out how much of your income actually falls above it before changing anything — the figure is usually smaller than people expect. Run your salary, bonus or pay rise through the pay rise tax trap calculator to see the marginal cost, then compare your options in the reduce higher-rate tax decision guide. If you are already a higher-rate taxpayer paying into a personal pension, check whether you have claimed the extra 20% relief — it is not given automatically.