The 40% Tax Bracket: Higher Rate Tax Explained

The 40 percent tax bracket, known as the higher rate, catches more and more people every year as wages rise and thresholds stay frozen. If you are moving towards it, or already in it, it pays to understand how it works, because it changes how much tax you owe and how much your reliefs are worth. This guide explains the higher rate tax bracket in plain English.

What is the 40% tax bracket?

The 40 percent bracket is the higher rate of income tax. For 2025/26 in England, Wales and Northern Ireland, the income tax bands are broadly:

• Personal Allowance: the first £12,570 is tax free.
• Basic rate, 20 percent: income from £12,571 to £50,270.
• Higher rate, 40 percent: income from £50,271 to £125,140.
• Additional rate, 45 percent: income above £125,140.

So you only pay 40 percent on the part of your income that falls within the higher rate band, not on your whole salary. Scotland has its own bands and rates.

A common misunderstanding

A lot of people think that crossing into the higher rate means all their income is taxed at 40 percent. It does not. The UK uses a marginal system, so only the slice of income above £50,270 is taxed at 40 percent. The income below that is still taxed at 20 percent and the Personal Allowance is still tax free.

Why the higher rate matters for reliefs

If you are a higher rate taxpayer, your tax reliefs are worth more. When you claim work expenses, you get relief at your highest rate of tax, so a higher rate taxpayer gets 40 percent back rather than 20 percent. That means uniform, mileage, professional fees and other claims are worth double what they are to a basic rate taxpayer. It makes checking your reliefs even more worthwhile.

Watch your Personal Allowance above £100,000

If your income goes above £100,000, your Personal Allowance is gradually withdrawn, by £1 for every £2 over £100,000, disappearing entirely at £125,140. This creates a very high effective tax rate in that band, and is a common area where tax codes go wrong. See our Personal Allowance guide for more.

Frequently asked questions

Does the 40% rate apply to all my income?

No. Only the part of your income above £50,270 (in England, Wales and Northern Ireland) is taxed at 40 percent.

I just went into the higher rate. Do my reliefs change?

Yes, in your favour. As a higher rate taxpayer your work expense claims are worth 40 percent rather than 20 percent.

What happens to my allowance over £100,000?

It tapers away, reducing by £1 for every £2 above £100,000 and disappearing at £125,140.

Could I have overpaid as a higher rate taxpayer?

Yes. If reliefs you are entitled to were not claimed at the higher rate, or your tax code was wrong, you may have overpaid.

Higher rate taxpayer? Your reliefs are worth more

At 40 percent, every relief you are owed is worth double. It is well worth checking nothing has been missed.

Start your claim with TaxPro and we will reclaim what you are owed, on a no win, no fee basis.