By assigning each employee a tax code (default 1257L for 2025/26 = £12,570 tax-free Personal Allowance) and applying the bands cumulatively each pay period. HMRC reconciles via a P800 after year-end if the code was wrong.
2025/26 UK income tax bands
| Band | England, Wales, Northern Ireland | Scotland |
|---|---|---|
| Personal Allowance (0%) | up to £12,570 | up to £12,570 |
| Starter (19%) | n/a | £12,571 – £14,876 |
| Basic (20%) | £12,571 – £50,270 | £14,877 – £26,561 |
| Intermediate (21%) | n/a | £26,562 – £43,662 |
| Higher | 40% on £50,271 – £125,140 | 42% on £43,663 – £75,000 |
| Advanced (45%) | n/a | £75,001 – £125,140 |
| Additional / Top | 45% above £125,140 | 48% above £125,140 |
What does my tax code mean?
A code like 1257L splits into a number × 10 (the tax-free Personal Allowance, here £12,570) and a letter that signals the rules. L is standard; M and N apply when part of the allowance was transferred via Marriage Allowance; K means deductions exceed the allowance, so extra tax is collected each period; BR, D0, and D1 apply basic, higher, and additional rate flat to all earnings (typically a second job). Scottish-resident codes carry an S prefix.
Why does PAYE adjust each pay period?
Tax is calculated cumulatively across the tax year, so PAYE rebalances year-to-date totals each payday: earning more last month means slightly higher tax this month. The cumulative model is what makes PAYE accurate without any maths on the employee's side. If the code is wrong (common after job changes), HMRC issues a P800 reconciliation after 5 April; under-payments come through next year's tax code, over-payments are refunded directly. The seven red flags article covers what lenders catch when PAYE figures don't reconcile.
In 6 steps
How to Calculate UK PAYE Income Tax for 2025/26
Apply HMRC rates step by step to work out the income tax due on each payslip: tax code, residency, bands, the £100k taper, cumulative calculation, and year-end reconciliation.
- 1
Read your tax code
Find your tax code on a recent payslip or in your HMRC personal tax account. The number times ten is your tax-free Personal Allowance: code 1257L means £12,570 tax-free. The letter signals special rules: L is standard, K means deductions exceed your allowance, BR/D0/D1 apply a flat rate to all earnings (used for second jobs).
- 2
Confirm whether you are a Scottish taxpayer
You are a Scottish taxpayer if Scotland is your main home, regardless of where you work. Scottish taxpayers use the bands set by Holyrood. Everyone else in England, Wales, and Northern Ireland uses the UK-wide bands.
- 3
Apply the 2025/26 income tax bands
For England, Wales, and Northern Ireland: 0% on the first £12,570, 20% on £12,571 to £50,270, 40% on £50,271 to £125,140, and 45% above £125,140. Scottish bands run starter 19%, basic 20%, intermediate 21%, higher 42%, advanced 45%, top 48%.
- 4
Apply the £100,000 Personal Allowance taper
Above £100,000 of total income, your Personal Allowance shrinks by £1 for every £2 you earn. By £125,140 the allowance is gone, so 40% applies from the first pound. This is the £100k tax trap.
- 5
Calculate cumulatively across the tax year
PAYE recalculates total tax due on year-to-date earnings each pay period, then deducts what you have already paid. That smooths out earnings spikes and tax-code corrections without any maths on your part.
- 6
Reconcile with HMRC after the tax year ends
If your code was wrong, HMRC issues a P800 reconciliation after 5 April. Underpayments come through next year’s tax code; overpayments are refunded directly.
Primary sources
- Income Tax rates and Personal Allowances — gov.uk — 2025/26 bands for England, Wales, Northern Ireland
- Tax codes — gov.uk — How tax codes are constructed and what each letter means
- Income Tax in Scotland — gov.uk — Scottish rates and bands set by Holyrood
- Income over £100,000 — gov.uk — Personal Allowance taper above £100,000
Editorial process: how we source and review UK tax content.