The Personal Allowance is £12,570 — the amount you earn before paying income tax. It tapers by £1 for every £2 earned above £100,000, disappearing at £125,140. This creates an effective 60% marginal rate in that band. Pension salary sacrifice can pull your income back below £100k to restore it.
Salary Sacrifice reduces gross pay before tax and NI are calculated — saving on both. Relief at Source uses net pay; HMRC then adds 20% basic-rate relief automatically, but higher-rate taxpayers must claim the extra 20–25% via self-assessment. Salary Sacrifice also reduces student loan repayments since those are income-based.
For multiple undergraduate plans (Plan 1, 2, 4, 5), HMRC applies a single 9% deduction on income above your lowest active threshold — not separate deductions per plan. A Postgraduate loan is always charged separately at 6% above £21,000 in addition. With undergrad + postgrad, you can be repaying up to 15% of income above the combined threshold.
It depends on your plan. Plan 2 loans are written off after 30 years — if you're unlikely to repay in full anyway, voluntary overpayments can be a poor financial decision. Compare the loan interest rate to what you could earn in a Stocks & Shares ISA (~5–8% long-term). Use the Endgame tab in the calculator to model your trajectory.
Self-employed taxes are paid via Self Assessment. Payments on account (each 50% of the prior year's bill) are due 31 January and 31 July. A balancing payment is due the following January. Set aside roughly 25–30% of profit monthly. The calculator's SE view shows your recommended monthly savings figure and both payment deadlines.
For every £2 earned between £100k–£125,140, you lose £1 of Personal Allowance. Combined with 40% income tax, the effective marginal rate is 60%. The most efficient solution is pension salary sacrifice — it reduces gross income, potentially pulling you below £100k and restoring your full allowance. Gift Aid donations have a similar effect.
No — bonuses are taxed at the same income tax and NI rates as salary. But because your employer pays a bonus in one lump month, PAYE temporarily treats it as if you earn that every month, which can push you into a higher band on that payslip. HMRC reconciles this at year-end via your P60 and issues a refund if needed. A bonus can also trigger student loan deductions in that month even if your annual salary is below the threshold — you can reclaim this from SLC afterwards.
Yes. Student loan repayments are 9% of income above your threshold. Salary sacrifice lowers your gross income, so the repayable amount shrinks too. Example: earn £35,000, sacrifice £5,000 into pension → repayable income drops to £30,000. On Plan 2 that saves you 9% × £5,000 = £450/year in loan repayments, on top of income tax and NI savings. Use the pension slider in the calculator to see the combined effect in real time.
In the Autumn 2025 Budget, the government froze the Plan 2 repayment threshold at £29,385 from April 2027, instead of allowing it to rise with earnings. As wages grow with inflation but the threshold doesn't, a larger share of your salary will exceed it — meaning you repay more over the life of the loan. This is "fiscal drag" applied to student loans. It affects English graduates who started university between 2012 and August 2023. Welsh borrowers are in ongoing discussions with Westminster.
Plan 5 repayments begin April 2026 for the first cohort (England, from September 2023 starters). The threshold is £25,000 — lower than Plan 2's £28,470+ — meaning repayments kick in at a lower salary. Interest is RPI only (no income-linked uplift), and the loan is written off after 40 years — 10 years longer than Plan 2. Because of the long write-off window, most graduates are very unlikely to clear Plan 5 in full; the Endgame tab can model your trajectory.
Yes — it's worth knowing before you maximise sacrifice. Because salary sacrifice legally reduces your contractual gross pay: mortgage lenders may use the lower figure for affordability checks; Statutory Maternity Pay is calculated on average weekly earnings in the 8 weeks pre-qualifying week, which could be reduced; and State Pension entitlement could be slightly affected if pay drops below the Lower Earnings Limit (£6,396 in 2026/27). For most people the tax savings outweigh these, but model it carefully if you're planning a mortgage or family in the near term.
Income Tax 2026/27
Band
Rate
Income up to
Personal Allowance
0%
£12,570
Basic Rate
20%
£50,270
Higher Rate
40%
£125,140
Additional Rate
45%
No limit
⚠ £100k–£125,140: effective 60% marginal rate due to PA taper
National Insurance 2026/27
Class
Rate
On income
Class 1 – PAYE main
8%
£12,570–£50,270
Class 1 – PAYE upper
2%
Above £50,270
Class 4 – SE main
6%
£12,570–£50,270
Class 4 – SE upper
2%
Above £50,270
Key Allowances 2026/27
Personal Allowance£12,570
ISA Annual Allowance£20,000
Pension Annual Allowance£60,000
Trading Allowance (SE)£1,000
VAT Registration Threshold£90,000
Higher Rate threshold£50,270
Plan
Who
2026/27 Threshold
Rate
Write-off
Interest
Plan 1
Pre-2012 Eng/Wales/NI
£26,900
9%
25 yrs / age 65
BoE base + 1% (capped at RPI)
Plan 2
2012–Aug 2023 Eng/Wales
£29,385
9%
30 years
RPI+3% (scaled) — ~6.9% in 2026/27
Plan 4
Scotland (post-1998)
£33,795
9%
30 yrs / age 65
BoE base + 1%
Plan 5
Post-Aug 2023 Eng/Wales
£25,000
9%
40 years
RPI only — no income-linked uplift
Postgrad
Master's / Doctoral
£21,000
6%
30 years
RPI+3% (same as Plan 2)
* Plan 5 repayments begin April 2026. Multiple undergrad plans: HMRC charges a single 9% deduction above your lowest active threshold. Postgrad always charged separately at 6%.
Your employer deducts income tax and NI from each payslip via a tax code (e.g. 1257L). You generally don't need to file a self-assessment return unless you have untaxed income, capital gains, or income above £100,000.
An arrangement where your contractual salary is reduced, with the equivalent paid as a non-cash benefit (typically pension). Because gross pay falls, you save NI, income tax, and student loan repayments. Your employer also saves employer NI (12–13.8%), and may pass some savings on as extra pension contributions.
HMRC requires self-employed taxpayers to pre-pay the estimated next year's tax in two 50% instalments — due 31 January and 31 July. In your first year of self-assessment this can feel brutal: you may owe 150% of your annual bill at once (the year's balance + first POA). The calculator reflects this in the SE summary.
Your marginal rate is the tax on your next pound of income. A basic-rate PAYE employee with a Plan 2 loan faces: 20% tax + 8% NI + 9% loan = 37% marginal rate. Your effective rate is total tax ÷ total income — typically much lower. The calculator shows both.
Self-employed people pay Class 4 NI via Self Assessment: 6% on profits £12,570–£50,270, then 2% above. Class 2 NI (voluntary, for state pension qualifying years) is no longer mandatory — you pay it through your tax return only if you want the qualifying year. If profit is below £6,845 (Small Profits Threshold), you won't get a qualifying year automatically.
ISAs use post-tax money but grow tax-free and can be accessed at any age. Pensions get upfront tax relief (and NI savings via salary sacrifice) but are locked until age 57 (rising to 58 in 2028). General rule: max your employer pension match first (free money), then use an ISA for flexibility, then top up pension for additional tax relief if in a higher rate band.
Gross salary is your total earnings before any deductions — the figure on a job offer or contract. Net salary (take-home pay) is what actually lands in your bank account after income tax, NI, pension, and student loan repayments are removed. The gap between the two widens significantly as income rises — a £60,000 gross salary has an effective take-home closer to £42,000 after all deductions in 2026/27.
Your tax code tells your employer how much Personal Allowance to give you. 1257L means £12,570 of tax-free income (1257 × 10). Emergency codes like BR (tax everything at 20%) or 0T (no Personal Allowance at all) are common when starting a new job without a P45. If your code looks wrong, contact HMRC directly — an incorrect code can mean months of over- or underpayment that needs to be reclaimed.
HMRC's annual tax return system for self-employed workers, landlords, and anyone with untaxed income. You report your income and expenses, HMRC calculates the bill. The filing deadline is 31 January online (31 October for paper). Late filing incurs an automatic £100 penalty even if no tax is owed. If you're self-employed, you'll also pay student loan repayments and Class 4 NI through this return rather than via payroll.
When tax thresholds are frozen while wages rise with inflation, more people are pushed into higher tax bands even though their real spending power hasn't increased. The UK's income tax thresholds are frozen at 2021 levels until April 2028 — and the Plan 2 student loan threshold is now frozen from April 2027. This is the government's primary stealth tax mechanism, estimated to pull millions of additional workers into the higher-rate tax band over the freeze period.
Sources: HMRC, SLC, GOV.UK — 2026/27. For guidance only; not financial or tax advice.