What is the 40% tax bracket?
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Only the earnings above £50,271 are taxed at 40%: Crossing into the higher-rate tax bracket does not mean your whole salary gets hit with a 40% tax rate. The 40% tax only applies to the extra cash you earn over £50,271 - your first £12,570 stays completely tax-free and the chunk between £12,571 and £50,270 is taxed at the basic 20% rate.
Overtime, site allowances, and bonuses can push you over: Getting a promotion, taking on extra shifts, or picking up a bonus can bump your overall income past £50,271, turning you into a higher-rate taxpayer without you realizing it.
Pensions and work expenses bring your tax bill back down: Paying into a pension or claiming tax relief on out-of-pocket work expenses (like travel, mileage, professional fees, and uniform washing) lowers your taxable earnings, keeping more of your hard-earned cash out of HMRC's hands.
If you've recently received a pay rise, bonus or promotion, you may have discovered that you're now in the 40% tax bracket.
For many people, that can sound alarming. One of the biggest tax myths in the UK is that once you cross into the higher-rate tax band, all of your income suddenly gets taxed at 40%.
Thankfully, that's not how the system works.
The UK uses a progressive income tax system. That means different portions of your income are taxed at different rates. Moving into the 40% tax bracket doesn't mean losing 40% of your salary. It simply means part of your earnings will now be taxed at the higher rate.
🧾 Did you know? Millions of workers are getting pulled into the 40% tax bracket due to frozen tax thresholds and rising wages. A common myth is that getting a pay rise or working extra overtime into the 40% band leaves you with less money overall - in reality, you always take home more money after a pay rise because only the extra money above £50,271 is taxed at 40%.
In this guide, we'll explain exactly how the 40% tax bracket works, who pays it, how the 60% tax trap affects higher earners and the legitimate ways you may be able to reduce your tax bill.
What is the 40% tax bracket in the UK?
The 40% tax bracket is the UK's higher-rate Income Tax band.
For the 2025/26 tax year, higher-rate tax applies to taxable income between £50,271 and £125,140 in England, Wales and Northern Ireland.
💡 RIFT Recommends: Use pension top-ups to beat the 40% tax rate. If extra overtime or a promotion pushes your total yearly pay over £50,271, putting that extra cash into your pension is one of the smartest moves you can make. It drops your taxable income back into the 20% band while HMRC tops up your pension with higher-rate tax relief.
UK Income Tax Bands & Rates Breakdown (2026/27)
Tax Band | Salary Portion | Income Tax Rate | How Your Cash Is Taxed |
|---|---|---|---|
Personal Allowance | Up to £12,570 | 0% | You keep 100% of this money completely tax-free. |
Basic Rate | £12,571 to £50,270 | 20% | Standard 20% Income Tax taken off this slice of pay. |
Higher Rate | £50,271 to £125,140 | 40% | Only the money earned inside this window is taxed at 40%. |
Additional Rate | Over £125,140 | 45% | Highest rate applies; Personal Allowance is fully wiped out. |
Many people assume that crossing the £50,271 threshold means their entire income is taxed at 40%, but it isn't. In fact only the portion of income above the threshold is taxed at the higher rate.
What about Scotland?
Scottish taxpayers have different income tax bands.
For 2025/26, the Scottish Higher Rate begins at £43,663 and is charged at 42%. Additional Scottish bands apply for higher earners. This means someone earning the same salary in Scotland may pay more Income Tax than someone living elsewhere in the UK.
How does the 40% tax bracket actually work?
The easiest way to understand higher-rate tax is to think of your income as being divided into slices.
Each slice is taxed separately.
Example: £55,000 salary
If you earn £55,000:
First £12,570 = tax-free Personal Allowance
Next £37,700 = taxed at 20%
Final £4,730 = taxed at 40%
You do not pay 40% tax on all £55,000.
Only £4,730 falls into the higher-rate band.
Example: £65,000 salary
If you earn £65,000:
First £12,570 = tax-free
Next £37,700 = taxed at 20%
Remaining £14,730 = taxed at 40%
Again, only part of your income is taxed at the higher rate.
This is why a pay rise will always leave you better off overall.
Who pays the 40% tax rate?
You don't need to be extremely wealthy to become a higher-rate taxpayer.
Thanks to frozen tax thresholds and rising wages, millions more people now fall into the 40% tax bracket than they did a few years ago.
Common higher-rate taxpayers include:
Senior teachers
Police inspectors
Engineers
IT professionals
Senior NHS staff
Construction managers
Armed Forces officers
Business owners
Contractors
You may also find yourself in the higher-rate band if:
You receive a large bonus
You earn commission
You have a second job
You receive rental income
You operate a side business
You have investment income
"Crossing into the 40% tax bracket can feel alarming, but it simply means part of your pay gets taxed at the higher rate - not your whole paycheck. The biggest mistake we see higher earners make is not claiming back their legitimate work expenses or pension relief, leaving thousands of pounds sitting with HMRC that could be back in their bank account." - Edward Waine ATT, RIFT Quality and Service Manager
What income counts towards the 40% tax bracket?
HMRC looks at your total taxable income, not just your salary.
Income that can contribute towards the higher-rate threshold includes:
Employment income
Bonuses and commission
Rental income
Self-employed income
Some investment income
Certain employment benefits
Pension income
Interest and dividends above applicable allowances
This is why people with multiple income streams can sometimes drift into higher-rate tax without realising it.
The 60% tax trap explained
One of the most misunderstood parts of the UK tax system affects people earning between £100,000 and £125,140.
Once your adjusted net income exceeds £100,000, your Personal Allowance begins to reduce.
For every £2 you earn above £100,000, you lose £1 of Personal Allowance. By the time your income reaches £125,140, your allowance disappears entirely.
This creates an effective marginal tax rate of 60%.
Example
Imagine your salary increases from £100,000 to £101,000.
You pay:
40% higher-rate tax on the extra income
Additional tax because part of your Personal Allowance is removed
The combined effect means £1,000 of additional earnings can create approximately £600 of extra tax.
It's one of the most important tax planning areas for higher earners.
For a deeper dive, see: How Earning Over £100k Affects Your Personal Allowance
Hidden costs of becoming a higher-rate taxpayer
Moving into the 40% tax bracket can affect more than just your Income Tax.
High Income Child Benefit Charge
If you or your partner claim Child Benefit and one of you earns over £60,000, you may have to repay some or all of the benefit through the High Income Child Benefit Charge.
Reduced savings allowance
Basic-rate taxpayers can earn up to £1,000 in savings interest tax-free.
Higher-rate taxpayers only receive a £500 Personal Savings Allowance.
Student loan deductions
If you're repaying a student loan, your effective deductions may be significantly higher than your headline tax rate.
Loss of Personal Allowance
As we've seen, earnings above £100,000 can trigger the Personal Allowance taper.
💡 RIFT Recommends: Claim your work travel and tool expenses. Many people often pay hundreds of pounds out of pocket for travel to temporary work sites, specialist kit, uniform laundry, or professional subscriptions. Claiming tax relief on these expenses reduces your overall taxable income so you pay less in that 40% tax bracket.
How can you reduce your 40% tax bill?
Paying higher-rate tax doesn't necessarily mean you're paying more tax than you need to.
Several legitimate tax reliefs and allowances may help reduce your taxable income.
Pension contributions
Pension contributions are one of the most effective tax-planning tools available to higher-rate taxpayers.
Benefits include:
Higher-rate tax relief
Potential reduction of adjusted net income
Preservation of Personal Allowance
Retirement savings growth
For many people, pension contributions are the simplest way to avoid the 60% tax trap.
Gift Aid donations
Gift Aid donations can extend your basic-rate tax band and potentially reduce higher-rate tax exposure.
Marriage Allowance
If you're married or in a civil partnership and one partner earns below the Personal Allowance threshold, you may be able to benefit from Marriage Allowance.
Claiming work expenses
Many higher-rate taxpayers fail to claim tax relief on employment expenses such as:
Professional subscriptions
Union fees
Specialist tools
Work travel
Unclaimed expenses can lead to years of unnecessary overpayments.
Common 40% tax bracket mistakes
Assuming a pay rise will leave you worse off
This is one of the most common tax myths.
Although part of your income may be taxed at a higher rate, you'll always take home more money overall.
Not checking your tax code
An incorrect tax code can result in significant overpayment.
Missing pension opportunities
Many higher earners overlook the value of pension tax relief.
Ignoring the £100k threshold
The Personal Allowance taper can be surprisingly expensive.
Forgetting to claim expenses
Thousands of people pay more tax than necessary because they never claim available reliefs.
Emergency tax and higher-rate taxpayers
Higher earners are particularly vulnerable to emergency tax.
This often happens after:
Starting a new job
Receiving a bonus
Changing employment
Missing a P45
Having multiple jobs
Emergency tax codes can result in substantial overpayments because HMRC temporarily assumes you'll continue earning the same amount throughout the year.
Common emergency tax codes include:
If you've paid emergency tax, you may be due a refund.
Why higher-rate taxpayers often overpay tax
At RIFT, we regularly see higher-rate taxpayers overpaying because of:
Unclaimed work expenses
Multiple jobs
Bonuses taxed incorrectly
Pension contribution errors Unclaimed reliefs
The more complex your income becomes, the greater the chance that something has been missed.
Could HMRC owe you money?
Many higher-rate taxpayers assume their tax affairs are correct because everything is handled through PAYE.
Unfortunately, that isn't always the case.
If you've:
Changed jobs
Received bonuses
Paid professional fees
Purchased tools or equipment for work
Travelled for work
Been placed on an emergency tax code
there's a possibility you've paid more tax than necessary.
Using a tax refund calculator can help identify whether you may be owed money back from HMRC.
Ready to claim your tax rebate?
Use our free tax rebate calculator for an instant estimate
Do I pay 40% tax on all my income?
No. Only the portion of income above the higher-rate threshold is taxed at 40%.
What salary puts you in the 40% tax bracket?
For 2025/26, higher-rate tax starts at £50,271 in England, Wales and Northern Ireland.
Why is the effective tax rate 60% between £100,000 and £125,140?
Because your Personal Allowance is gradually removed as your income rises above £100,000.
Is the 40% tax bracket different in Scotland?
Yes. Scotland has different tax bands, and the Higher Rate currently starts at £43,663 and is charged at 42%.
Can pension contributions reduce higher-rate tax?
Yes. Pension contributions can reduce your taxable income and may help preserve your Personal Allowance.
