How Much Tax Do I Pay in the UK?
A plain-English guide to every tax you might pay — from your payslip to your shopping basket.
The Quick Answer
Most UK residents pay Income Tax (20-45% on earnings above £12,570), National Insurance (8% on employment income), and VAT (20% on most purchases). You may also pay Council Tax on your home, Stamp Duty when buying property, and Capital Gains Tax if you sell assets at a profit. Your total tax burden depends on your income level, what you own, and how you spend.
Income Tax Explained
Income Tax is the main tax on your earnings. You pay it on wages, self-employment profits, pension income, and most other regular income. The rates for 2026/27 are:
| Band | Taxable Income | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic Rate | £12,571 – £50,270 | 20% |
| Higher Rate | £50,271 – £125,140 | 40% |
| Additional Rate | Over £125,140 | 45% |
Important: If you earn over £100,000, your Personal Allowance reduces by £1 for every £2 earned above this threshold. It disappears entirely at £125,140.
National Insurance
National Insurance (NI) is a separate tax that funds state benefits, including the State Pension and NHS. Employees pay Class 1 NI, while self-employed people pay Class 2 and Class 4 NI.
Employee NI (Class 1) — 2026/27
- £0 to £12,570 per year: 0%
- £12,571 to £50,270: 8%
- Over £50,270: 2%
Self-Employed NI — 2026/27
- Class 2: No longer charged automatically — available voluntarily at £3.65/week to protect State Pension credits (Small Profits Threshold: £7,105)
- Class 4: 6% on profits between £12,570 and £50,270, then 2% above
Your employer also pays NI on your wages (15% above £5,000), but this doesn't appear on your payslip.
Tax on Savings & Investments
Savings Interest
Interest from bank accounts and bonds is taxable, but you get a Personal Savings Allowance:
- Basic rate taxpayers: £1,000 tax-free
- Higher rate taxpayers: £500 tax-free
- Additional rate taxpayers: No allowance
Dividends
Dividend income has its own allowance and rates:
- Dividend Allowance: £500 tax-free (2026/27)
- Basic rate band: 10.75%
- Higher rate band: 35.75%
- Additional rate band: 39.35%
Capital Gains Tax
When you sell assets (shares, property, crypto) for a profit, you may owe CGT. The annual tax-free allowance is £3,000 for 2026/27. Rates are:
- All assets (from April 2026): 18% (basic rate) / 24% (higher/additional rate)
ISAs are tax-free: Interest, dividends, and gains within an ISA are exempt from all UK tax. You can save up to £20,000 per year.
Property Taxes
Stamp Duty (SDLT)
When you buy a property in England or Northern Ireland, you pay Stamp Duty Land Tax on the purchase price. First-time buyers get relief up to £300,000 (on properties up to £500,000).
Council Tax
An annual tax on residential property, set by your local council. Rates depend on your property's valuation band (A to H) and your council's charges. Typical bills range from £1,200 to £3,500+ per year.
Inheritance Tax
When you die, your estate may be liable for IHT at 40% on assets above £325,000 (or £500,000 if passing a home to direct descendants). Spouses can inherit tax-free.
Everyday Taxes You Might Not Notice
VAT (20%)
Included in most prices you pay — electronics, clothes, eating out. Some items (food, children's clothes, books) are zero-rated.
Fuel Duty (52.95p/litre)
Charged on petrol and diesel before VAT is added. Around 40% of the pump price is tax.
Alcohol Duty
A pint of beer includes around 55p in duty. Wine and spirits have their own (higher) rates.
Insurance Premium Tax (12%)
Added to car, home, and travel insurance premiums. You pay it automatically.
Vehicle Excise Duty (Road Tax)
Annual charge to drive on UK roads. Zero for electric vehicles, £190/year for most petrol/diesel cars. First-year rates depend on CO2 emissions.
How to Estimate Your Own Tax
To estimate your total UK tax burden:
- Check your payslip — Income Tax and NI are shown as deductions
- Review your Council Tax bill — sent each spring by your local authority
- Estimate VAT — roughly 17% of your non-food, non-rent spending
- Add investment taxes — if you have dividends or capital gains above allowances
- Factor in one-off taxes — Stamp Duty if buying, IHT on inheritance
Rule of thumb: A typical employee on £40,000 pays around £5,500 in Income Tax, £2,200 in NI, £2,000 in Council Tax, and £3,000+ in VAT and other indirect taxes — a total of roughly £12,700 per year, or 32% of gross income.
Calculate Your Exact Tax
Use our free calculators to see precisely how much you pay.
Last updated: April 2026. Tax rates shown are for the 2026/27 tax year.