Work out your take-home pay
Income tax, National Insurance and net pay for any UK salary, 2026-27.
Most people in England, Wales and Northern Ireland can earn £12,570 in a tax year before any income tax is due, the figure known as the Personal Allowance [1]. An employee also starts paying National Insurance once earnings pass the same £12,570 a year, or £242 a week, so the two main payroll taxes now share a single starting line [2].
That single figure is only the beginning of the answer. The amount a person can earn tax-free depends on the type of income, whether it is wages, self-employment profit, savings interest or dividends, and on a set of additional allowances that stack on top of the Personal Allowance. A saver on a low wage can receive several thousand pounds more before paying anything, while a high earner can lose the Personal Allowance entirely.
This article sets out the Personal Allowance and how it works, the point at which National Insurance begins, the extra tax-free allowances for savings, dividends and self-employment, the taper that removes the allowance above £100,000, and how an employer's payroll applies all of this automatically through the tax code.
Key takeaways
- The standard Personal Allowance is £12,570 for the 2026-27 tax year, the amount of income that carries no income tax [1].
- Employees begin paying National Insurance on earnings above £12,570 a year, or £242 a week, aligned with the income tax threshold [2].
- A £1,000 trading allowance lets someone earn up to £1,000 of self-employment income before needing to report it [3].
- The Personal Allowance is reduced by £1 for every £2 of income above £100,000 and disappears at £125,140 [1].
- Savers and dividend investors have separate allowances that sit on top of the Personal Allowance [4].
The Personal Allowance, the main tax-free amount
The Personal Allowance is the slice of income on which no income tax is charged, and for the 2026-27 tax year it stands at £12,570 [1]. It applies to earnings from employment, profit from self-employment, most pensions and rental income, all added together. Income above the allowance is taxed in bands, starting at the basic rate of 20% up to £50,270, then 40% up to £125,140, and 45% above that in England, Wales and Northern Ireland [1].
The allowance is delivered through the tax code. A person with the full allowance and no complications carries the code 1257L, where the digits represent the allowance divided by ten [5]. An employer's payroll spreads the £12,570 across the year, so a monthly-paid employee receives roughly £1,048 tax-free each month rather than earning the full allowance before tax starts [2]. The table below shows the income tax bands that apply outside Scotland.
| Band | Taxable income above the allowance | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% [[1]](https://www.gov.uk/income-tax-rates) |
| Basic rate | £12,571 to £50,270 | 20% [[1]](https://www.gov.uk/income-tax-rates) |
| Higher rate | £50,271 to £125,140 | 40% [[1]](https://www.gov.uk/income-tax-rates) |
| Additional rate | Above £125,140 | 45% [[1]](https://www.gov.uk/income-tax-rates) |
Scotland uses different bands
A Scottish taxpayer has the same £12,570 Personal Allowance, because the allowance is set by the UK government, but the rates and bands above it are set by the Scottish Parliament and differ from the rest of the UK [1]. Scottish income tax runs through more bands, starting with a 19% starter rate, so the point at which a Scottish worker pays a given rate is not the same as elsewhere [6]. A Scottish tax code is prefixed with the letter S, and payroll software applies the correct table automatically once the code is in place [5].
When National Insurance starts
Income tax is only half of the deduction most workers see on a payslip. The other is National Insurance, and for an employee it begins at the Primary Threshold, which for the 2026-27 tax year is £242 a week, £1,048 a month or £12,570 a year [2]. Earnings between the Primary Threshold and the Upper Earnings Limit of £50,270 attract employee National Insurance at 8%, and earnings above that at 2% [7].
There is a subtle difference in how the two taxes measure the threshold. Income tax is cumulative across the year, so an employee who earns nothing for six months and then a large amount can still use the whole annual allowance, whereas National Insurance is assessed on each pay period in isolation [7]. A person earning £242 in one week pays no National Insurance that week, even if their annual total would be low. Getting this right is a core function of any HMRC-recognised payroll software for SMEs, because the two calculations run on different clocks within the same payslip [2].
The table compares where the two main payroll deductions begin and how they scale.
| Measure | Income tax | Employee National Insurance |
|---|---|---|
| Tax-free threshold | £12,570 a year [[1]](https://www.gov.uk/income-tax-rates) | £12,570 a year (£242 a week) [[2]](https://www.gov.uk/guidance/rates-and-thresholds-for-employers-2026-to-2027) |
| Main rate | 20% | 8% [[7]](https://www.gov.uk/national-insurance-rates-letters) |
| Assessed | Cumulatively across the year | Per pay period [[7]](https://www.gov.uk/national-insurance-rates-letters) |
What the employer pays on top
Employers face a lower threshold still. Employer National Insurance is charged at 15% on each employee's earnings above the Secondary Threshold of £5,000 a year, a rate that rose from 13.8% on 6 April 2026 [7]. This means an employer starts paying National Insurance on a salary well before the employee does, which is a frequent surprise for small businesses taking on their first member of staff [2]. Accountants managing this across many employers often rely on a multi-client payroll dashboard to track each scheme against the right thresholds.
Extra tax-free allowances that stack on top
The Personal Allowance is not the only tax-free amount. Several separate allowances apply to specific kinds of income, and they sit on top of the £12,570, which is why a person's true tax-free total can be much higher than the headline figure [4]. The exact combination depends on how someone earns their money.
Savings interest has its own reliefs. A basic-rate taxpayer can receive £1,000 of interest tax-free through the Personal Savings Allowance, falling to £500 for a higher-rate taxpayer and nothing for an additional-rate taxpayer [4]. On top of that, a low earner can use the starting rate for savings, a 0% band of up to £5,000 that applies when other income is below £17,570 and shrinks by £1 for every £1 of other income above the Personal Allowance [4]. Dividend income carries a separate £500 dividend allowance before any dividend tax is due [8].
The table summarises the main tax-free allowances for the 2026-27 tax year.
| Allowance | Amount | Applies to |
|---|---|---|
| Personal Allowance | £12,570 | Most income [[1]](https://www.gov.uk/income-tax-rates) |
| Personal Savings Allowance | £1,000 (basic rate) | Savings interest [[4]](https://www.gov.uk/apply-tax-free-interest-on-savings) |
| Starting rate for savings | Up to £5,000 | Savings interest for low earners [[4]](https://www.gov.uk/apply-tax-free-interest-on-savings) |
| Dividend allowance | £500 | Dividend income [[8]](https://www.gov.uk/tax-on-dividends) |
| Trading allowance | £1,000 | Self-employment income [[3]](https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income) |
| Property allowance | £1,000 | Rental income [[3]](https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income) |
Self-employment and the trading allowance
Someone earning a small amount from self-employment can use the trading allowance, which exempts the first £1,000 of gross trading income from tax and removes the need to report it [3]. Once gross income passes £1,000, the person must register for Self Assessment, though they can still choose to deduct the £1,000 allowance instead of their actual expenses if that works out better [9]. A self-employed person combining the trading allowance with an unused Personal Allowance can therefore earn a meaningful sum before any tax arises, a point covered in more depth in the Moonworkers guide to paying tax when self-employed. Anyone running a business alongside a job should note that the Personal Allowance is shared across all income, so a salary that already uses the full £12,570 leaves none for the side income [1].
Allowances that raise or lower the tax-free amount
Two allowances change the Personal Allowance itself rather than adding a separate band. Marriage Allowance lets a lower earner transfer £1,260 of their Personal Allowance to a spouse or civil partner who is a basic-rate taxpayer, worth up to £252 a year to the couple [10]. The transferring partner reduces their own tax-free amount, so it only helps when they do not need the full allowance themselves [10].
Blind Person's Allowance is an extra tax-free amount added to the Personal Allowance, set at £3,250 for the 2026-27 tax year, and it can be transferred to a spouse if the recipient cannot use it all [11]. These adjustments feed into the tax code, which is how payroll applies them without the employee doing anything each payday [5]. An employer issuing a first payslip to a new starter relies on the code supplied by HMRC or the starter checklist, and an accurate instant payslip generator reflects these allowances from the first payment.
The £100,000 taper for high earners
At the other end, the Personal Allowance is withdrawn from high earners. For every £2 of adjusted net income above £100,000, the allowance falls by £1, so it is fully gone by £125,140 [1]. In the band between £100,000 and £125,140 this produces an effective marginal rate of 60%, because each extra pound is taxed at 40% and also strips away 50 pence of previously tax-free allowance [1]. A high earner in this band therefore has a much lower tax-free amount than the standard £12,570, and some use pension contributions to bring their adjusted net income back below £100,000 [8].
Worked examples across different incomes
The tax-free total becomes clearer with figures. A single employee with no other income and the standard tax code pays no income tax on the first £12,570 of salary, then 20% on the next slice up to £50,270 [13]. Someone in this position who also holds £15,000 in a savings account earning 4% receives £600 of interest, comfortably within the £1,000 Personal Savings Allowance, so that interest is tax-free as well [4].
A very different picture applies to a low earner. A part-time worker earning £8,000 from a job uses only part of the Personal Allowance, leaving £4,570 unused, and can also claim the full £5,000 starting rate for savings because their other income is well below £17,570 [4]. In principle that person could receive a further large sum of savings interest with no tax at all, a combination that catches many people by surprise [14]. The lesson is that the tax-free amount is personal, not a single national figure.
Pension income counts too
Income from a private or state pension is taxable in the same way as earnings, and it draws on the same Personal Allowance [15]. A pensioner whose total pension income is below £12,570 pays no income tax, while anyone above it pays at the normal bands [15]. Because the State Pension is paid without tax deducted, a person with both a State Pension and a private pension often finds the tax on the untaxed portion collected through the tax code on the private pension, which is why the code can look unusual [5]. Estimating the position ahead of time avoids a surprise, and HMRC provides an online tool to check the current year's figures [14].
How payroll applies the allowance automatically
For an employee, none of this requires manual calculation each payday. HMRC issues a tax code that tells the employer how much tax-free pay to give in each period, and payroll software spreads the allowance evenly across the year [5]. Software that holds the HMRC Recognised badge submits the Full Payment Submission under Real Time Information every payday and applies the current thresholds without manual reconfiguration [12]. For platforms that build payroll into their own product, the HMRC-recognised payroll API applies the Personal Allowance, the National Insurance thresholds and the tax code through a single integration [2].
Work out when tax starts on a given salary
To see exactly where income tax and National Insurance begin to bite on a particular wage, the Moonworkers UK salary calculator applies the 2026-27 Personal Allowance and thresholds to any gross figure and shows the resulting take-home pay.
£ per month
e.g. 1257L, S1257L, BR, D0
S = Scotland · C = Wales · W1/M1 = non-cumulative
Enter a salary or hourly rate above
About this calculator
This calculator gives you a close estimate of your UK payroll deductions for 2026-27, using HMRC's exact percentage method with periodised thresholds. It handles the three tax territories, K codes with the 50% regulatory limit and its carry-forward, weeks 53, 54 and 56, the cumulative and W1/M1/X bases, student and postgraduate loans, and pension contributions on qualifying earnings. It still won't match your payslip to the penny in every case: it does not cover in-year tax code changes, payrolled benefits in kind, NI deferral across more than one employment, directors on the annual earnings period, or employer-level annual adjustments such as the Employment Allowance and the apprenticeship levy. Powered by the same engine as the Moonworkers Payroll API.
Frequently asked questions
Why might the result differ from my payslip?
This calculator uses your current gross pay and tax code to produce an estimate. K-code carry-forwards and weeks 53, 54 and 56 are handled, and the Year-to-date section reproduces a specific period exactly. What your employer may apply that this does not: a mid-year tax code change, benefits in kind processed through payroll, or NI deferral across more than one employment. For most employees on a standard tax code the difference is negligible.
What tax code should I enter?
Use the tax code shown on your most recent payslip or the PAYE Coding Notice (P2) from HMRC. If you're not sure, 1257L is the standard code for most employees resident in England, Wales, or Northern Ireland. Use S1257L for Scotland or C1257L for Wales if you pay Scottish or Welsh income tax.
Which NI category applies to me?
Most employees use Category A. Use M if you are under 21, H if you are an apprentice under 25, or C if you are over State Pension age. Your employer is responsible for assigning the correct category — if in doubt, check your payslip.
Which student loan plan am I on?
Your plan depends on when and where you studied. Plan 1 covers students who started before September 2012. Plan 2 is for English and Welsh students who started from September 2012 to July 2023. Plan 5 applies to English students who started from August 2023. Plan 4 covers Scottish students. You can check your plan at gov.uk or on your payslip.
What is the YTD cumulative PAYE mode?
HMRC's standard method calculates income tax on your total earnings to date each period, then subtracts tax already paid. If you're mid-year and want to see exactly what tax should be deducted in a specific period, expand the Year-to-date section and enter your running totals from previous periods only.
Conclusion
The short answer to how much a person can earn before paying tax is £12,570, but the useful answer is that it depends on the shape of their income. Wages and self-employment profit draw on the same Personal Allowance and, for employees, the same National Insurance threshold, while savings, dividends and small trading income each carry their own tax-free band that stacks on top. The picture shifts again for couples who transfer allowances and for high earners who lose theirs entirely above £100,000.
For workers, the practical effect is delivered quietly through the tax code, and for employers the responsibility is to apply that code correctly on every payslip. As thresholds stay fixed while wages rise, more people are drawn into paying tax on income that was once below the line, which makes accurate, up-to-date payroll the difference between a correct deduction and a costly correction later.
Frequently asked questions
How much can you earn before paying income tax and National Insurance?
For the 2026-27 tax year, an employee can earn £12,570 before either income tax or National Insurance is due, because the two thresholds are aligned [2]. Income above that is taxed at 20% and carries employee National Insurance at 8% up to £50,270 [7]. Savings and dividend income have separate allowances that can raise the total a person receives tax-free [4].
Does everyone get the £12,570 Personal Allowance?
Most people do, but it is withdrawn from high earners. The Personal Allowance falls by £1 for every £2 of income above £100,000 and reaches zero at £125,140 [1]. People with a tax code such as BR or 0T may also have no allowance applied in that employment, usually because it is a second job or pension where the allowance is used elsewhere [5].
How much can you earn self-employed before paying tax?
A self-employed person can earn up to £1,000 of gross trading income under the trading allowance without reporting it or paying tax [3]. Beyond that, self-employment profit uses the same £12,570 Personal Allowance as other income, so someone with no other earnings pays no income tax until profit exceeds the allowance [9]. Registration for Self Assessment is required once gross income passes £1,000.
How much savings interest can you earn before paying tax?
A basic-rate taxpayer can receive £1,000 of savings interest tax-free through the Personal Savings Allowance, and a higher-rate taxpayer £500 [4]. A person with low other income can add the starting rate for savings, a 0% band of up to £5,000, on top of the Personal Allowance [4]. This means a low earner can receive several thousand pounds of interest before any tax is due.
Image prompt for Imagen (also in frontmatter)
Documentary-style wide shot, a young worker at a small kitchen table checking a payslip against a laptop showing an online tax account, morning light through a window, a mug of tea and a notebook nearby, muted palette of warm grey, sage green and paper white, off-centre composition with the subject in the right third, shot on a Leica Q3 at 28mm f/2.8, photojournalism, 35mm film grain, no AI artefacts, no warped hands, no warped text, landscape orientation 16:9.
