This guide covers UK employment income tax and National Insurance for the 2026–27 tax year, from 6 April 2026 to 5 April 2027. The correct treatment depends on tax residence, income type, the applicable UK jurisdiction and any reliefs. Employers normally deduct employment income tax through PAYE using the employee’s tax code.
Personal Allowance
The standard Personal Allowance is £12,570. It falls by £1 for each £2 of adjusted net income above £100,000 and is zero at £125,140 or more. Adjusted net income is a defined tax measure, so the taper should not be calculated solely from a salary figure without considering the relevant adjustments.
The standard allowance is the same for Scottish taxpayers, although the rates and bands applying to their employment income differ. A tax-code adjustment to collect an earlier tax debt should not be confused with a change to the statutory Personal Allowance.
Income tax rates: England, Wales and Northern Ireland
The following rates apply to non-savings, non-dividend taxable income in 2026–27. The bands are shown after deducting any available Personal Allowance; they are not gross-salary bands. Savings and dividends have separate rules.
| Taxable income after allowances | Marginal rate |
|---|---|
| First £37,700 | 20% |
| Over £37,700 up to £125,140 | 40% |
| Over £125,140 | 45% |
Example: £200,000 annual employment income
Assume the employee is taxed under the England, Wales or Northern Ireland rates, has £200,000 of employment income and adjusted net income, and has no deductions, other income or reliefs. The Personal Allowance is zero.
- £37,700 × 20% = £7,540
- £87,440 × 40% = £34,976
- £74,860 × 45% = £33,687
Total income tax: £76,203. This excludes National Insurance and other payroll deductions. Actual PAYE deductions depend on the tax code and payroll circumstances.
Scottish employment income tax
For Scottish taxpayers in 2026–27, the following bands apply to taxable employment income after allowances:
| Taxable income after allowances | Rate |
|---|---|
| Up to £3,967 | 19% |
| £3,968 to £16,956 | 20% |
| £16,957 to £31,092 | 21% |
| £31,093 to £62,430 | 42% |
| £62,431 to £125,140 | 45% |
| Over £125,140 | 48% |
Tax residence and overseas income
UK tax residence is determined under the Statutory Residence Test, not simply by citizenship or visa status. Spending at least 183 days in the UK is an automatic UK residence test. For shorter stays, the automatic overseas tests, other automatic UK tests and sufficient-ties test must be considered in the prescribed order. Having a UK home or working in the UK requires the full conditions of the relevant test to be checked.
UK residents are generally taxable on worldwide income, subject to applicable reliefs, treaties and any split-year treatment. Non-residents can remain liable on taxable UK-source income, with source-specific exemptions and treaty rules. Eligible new residents may claim relief on qualifying foreign income and gains under the four-year FIG regime introduced from 6 April 2025; eligibility and the consequences of a claim require a separate assessment.
National Insurance for employees and employers
National Insurance has different contribution classes. It is not divided into employee contributions and a separate “non-contributory” payment made by retirees.
For a typical category A employee paid monthly in 2026–27, employee Class 1 contributions are 8% on earnings above £1,048 up to £4,189 and 2% on earnings above £4,189. Contributions do not stop at an upper annual salary cap. Payroll category, pay period, age and any special rules can change the calculation.
Standard employer Class 1 contributions are generally 15% above the secondary threshold of £417 per month, subject to the relevant category and reliefs. Employer contributions are separate from deductions made from the employee’s wages.
Self-employed National Insurance and State Pension age
For 2026–27, Class 4 contributions are 6% on annual profits above £12,570 up to £50,270 and 2% above £50,270. Where annual profits are at least £7,105, Class 2 contributions are generally treated as paid to protect the contribution record. Below that level, eligible individuals may choose voluntary Class 2 contributions at £3.65 a week.
Employees generally stop paying employee National Insurance at State Pension age. Self-employed people stop paying Class 4 from 6 April after reaching that age. The applicable State Pension age depends on date of birth.
Employment status requires a separate assessment
Employment status for tax and for employment rights can differ. An employee is also a worker for employment-law purposes, while some workers are not employees. The actual working relationship matters alongside contractual terms; calling someone a contractor does not settle their status. Employers should assess the applicable PAYE and National Insurance treatment and employment rights separately.
How NNRoad supports UK employment
NNRoad’s UK EOR and payroll services support the agreed employment and payroll responsibilities, including applicable PAYE deductions and reporting. Cross-border residence, personal tax-return obligations and individual relief claims should be assessed separately. Contact NNRoad to confirm the scope of support for your hire.