Guide · Budgeting
What the 2026/27 Budget Means for Your Take-Home Pay
Frozen thresholds, unchanged NI rates, and student loan changes — how each one affects your monthly pay cheque depending on what you earn.
The big picture: fiscal drag continues
The 2026/27 tax year brings no headline rate changes to income tax or National Insurance. But frozen thresholds — unchanged since 2021 — continue to pull more workers into higher tax bands as wages rise. This "fiscal drag" is the quietest tax rise in British politics: your salary goes up, your bill goes up faster, but no Chancellor has to stand at a despatch box and announce a rate increase.
The personal allowance has been frozen at £12,570 since April 2021. Had it risen with inflation, it would be over £15,000 by now. Every £1 of that gap is taxed at 20% — money that workers at every income level are now paying that they would not have paid five years ago.
2026/27 income tax and NI rates at a glance
| Income band | Income tax rate | Employee NI |
|---|---|---|
| Up to £12,570 | 0% (personal allowance) | 0% |
| £12,571 – £50,270 | 20% (basic rate) | 8% |
| £50,271 – £100,000 | 40% (higher rate) | 2% |
| £100,001 – £125,140 | 60% effective* | 2% |
| Above £125,140 | 45% (additional rate) | 2% |
* 60% effective rate arises from personal allowance tapering: for every £2 earned above £100,000 you lose £1 of allowance, taxed at 20%.
What does this look like in practice? Here is the monthly take-home pay at five common salary levels in 2026/27 (England, no pension, no student loan):
| Gross salary | Monthly gross | Tax + NI | Monthly take-home |
|---|---|---|---|
| £25,000 | £2,083 | £327 | £1,756 |
| £35,000 | £2,917 | £617 | £2,300 |
| £50,000 | £4,167 | £1,075 | £3,092 |
| £60,000 | £5,000 | £1,552 | £3,448 |
| £80,000 | £6,667 | £2,384 | £4,283 |
Approximate figures. Scotland uses different income tax bands.
Student loans: the invisible deduction
Student loan repayments are collected through PAYE and do not appear on your payslip as "tax," but they act exactly like one. Plan 2 borrowers repay 9% of earnings above £28,470. On a £35,000 salary that is £585 per year — £48.75/month — deducted automatically before you see your pay.
Plan 2 threshold £28,470 for 2026/27. Plan 5 (post-2023 starters) has a lower threshold of £25,000, meaning repayments begin earlier.
How to reduce your tax bill legally
With no cuts on the horizon, the tools available to reduce your effective rate are the same as always:
- Pension contributions reduce your adjusted net income and can push you back into a lower band — particularly valuable between £100,000 and £125,140 where the effective rate hits 60%.
- Salary sacrifice saves income tax and National Insurance, rather than just reclaiming tax relief after the fact.
- ISA contributions shelter investment returns from future tax — not a current-year saving, but important for long-term planning.
- Marriage allowance lets a non-taxpayer transfer £1,260 of personal allowance to a basic-rate spouse — worth £252/year.
Frequently asked questions
What are the income tax bands in 2026/27?
The personal allowance remains £12,570. The basic rate (20%) applies from £12,571 to £50,270. The higher rate (40%) applies from £50,271 to £125,140. The additional rate (45%) applies above £125,140. The £100,000–£125,140 band has an effective 60% rate due to personal allowance tapering.
What is the National Insurance threshold in 2026/27?
The Primary Threshold — where employee Class 1 NI begins — remains at £12,570 per year (£1,047.50/month). The employee rate is 8% on earnings between the Primary Threshold and the Upper Earnings Limit (£50,270), and 2% above that.
How does the personal allowance taper work?
For every £2 of income above £100,000, you lose £1 of your personal allowance. Between £100,000 and £125,140 this creates an effective marginal tax rate of 60% (40% income tax plus the loss of 20%-taxed allowance). Above £125,140 you have no personal allowance.
What are the student loan repayment thresholds in 2026/27?
Plan 1: £24,990/year (9% above). Plan 2: £28,470/year (9% above). Plan 4 (Scotland): £31,395/year (9% above). Plan 5: £25,000/year (9% above). Postgraduate: £21,000/year (6% above). Multiple plans are repaid simultaneously.