PAYE Tax Breakdown Calculator UK 2026

What is PAYE and how does it work in the UK?

PAYE (Pay As You Earn) is the system HMRC uses to collect Income Tax and National Insurance contributions directly from your wages or pension before you receive them. Your employer deducts tax based on your tax code, which determines your personal allowance and applicable tax rates.

For 2026/27, you'll pay 0% on the first £12,570 (Personal Allowance), 20% on earnings between £12,571 and £50,270 (Basic Rate), 40% up to £125,140 (Higher Rate), and 45% on anything above (Additional Rate).

The system is designed to spread your tax liability evenly across the year, so you should pay roughly the correct amount by April without needing to complete a Self Assessment tax return (unless you have other untaxed income).

How much National Insurance will I pay in 2026/27?

For the 2026/27 tax year, employees pay 8% National Insurance on earnings between £12,570 and £50,270 (the Primary Threshold to Upper Earnings Limit), then 2% on anything above £50,270.

If you earn below the primary threshold of £12,570 annually (£242/week), you pay no National Insurance but still build qualifying years towards your State Pension as long as you earn above the Lower Earnings Limit of £6,396 annually (£123/week).

National Insurance is separate from Income Tax and can't be reduced through pension contributions (except via salary sacrifice arrangements where your gross salary is reduced before NI is calculated).

What are the student loan repayment thresholds for 2026/27?

Student loan repayment thresholds for 2026/27 depend on your plan type:

• Plan 1: £24,990 (9% repayment rate)
• Plan 2: £27,295 (9% repayment rate)
• Plan 4: £31,395 (9% repayment rate - Scotland only)
• Plan 5: £25,000 (9% repayment rate - students starting from Sept 2023)
• Postgraduate Loan: £21,000 (6% repayment rate)

You'll repay 9% of income above your threshold (6% for Postgraduate Loans) through PAYE deductions. If you have both an undergraduate loan and a Postgraduate Loan, you'll repay both simultaneously but separately calculated.

For contractors working through limited companies or umbrella companies, explore our Contractor Take Home Pay Calculator to see how student loans affect your net income.

Can I reduce my tax by increasing pension contributions?

Yes, absolutely. Workplace pension contributions reduce your taxable income before PAYE tax is calculated (if using Net Pay Arrangement, which most employers do). This gives you tax relief at your marginal rate.

For example:

• If you're a 20% Basic Rate taxpayer and contribute £100 to your pension, you'll save £20 in Income Tax. The contribution only costs you £80 in take-home pay.
• If you're a 40% Higher Rate taxpayer and contribute £100, you'll save £40 in tax, so it costs £60.
• If you're in the 60% effective rate zone (earnings £100k-£125k where Personal Allowance tapers), you'll save £60, costing just £40.

Salary sacrifice pension arrangements can also save National Insurance contributions (both employee and employer contributions), making them even more tax-efficient. This is particularly valuable for higher earners approaching the £100,000 Personal Allowance taper threshold.

What is the Marriage Allowance and how do I claim it?

Marriage Allowance lets you transfer £1,260 of your Personal Allowance to your spouse or civil partner if they earn more than you. This can reduce their tax bill by up to £252 per year (£1,260 × 20%).

Eligibility requirements:

• You must be married or in a civil partnership
• The lower earner must earn less than £12,570 (the Personal Allowance)
• The higher earner must be a Basic Rate taxpayer (earning between £12,571 and £50,270)
• You cannot claim if either partner pays the Higher Rate (40%) or Additional Rate (45%)

You can apply online through HMRC's website, and you can backdate the claim for up to four tax years if you were eligible but didn't claim. The allowance is applied through an adjustment to your tax codes.

Why does my payslip show different tax amounts each month?

PAYE operates on a cumulative basis throughout the tax year (April to April). Each month, your employer calculates:

• Your total earnings and tax-free allowances from April to the current month
• How much tax you should have paid on those cumulative earnings
• How much tax you've actually paid so far
• The difference, which is your tax due this month

This means variations can occur if:

• You receive a bonus or commission in a particular month
• Your tax code changes during the year
• You had periods of unpaid leave
• You started employment partway through the tax year
• You have benefits in kind that affect your tax code

The cumulative system ensures you pay the correct total tax by year-end, even if monthly amounts fluctuate. Your payslip should show your tax code, cumulative earnings, and cumulative tax paid to date.

What happens to my tax if I have multiple jobs?

When you have multiple jobs, your Personal Allowance (£12,570) is usually allocated to your main job only. Additional jobs typically use one of these tax codes:

• BR (Basic Rate): All income from this job is taxed at 20% with no Personal Allowance
• D0 (Higher Rate): All income taxed at 40% (if your main job already uses all your Basic Rate band)
• D1 (Additional Rate): All income taxed at 45% (rare, for very high earners)

You'll pay National Insurance separately on each job (8% on earnings above £12,570 per job, then 2% above £50,270 per job). However, your tax bands are based on total income across all jobs.

At the end of the tax year, HMRC reviews your total income. If you've overpaid tax (common with multiple jobs), you'll receive a refund. If you've underpaid, you'll need to pay the difference.

If you're juggling multiple income sources, our Job Offer Comparison Tool can help you evaluate the true value of different employment opportunities.