Tax planning·By Simon Jacobs, CTA · ACA·29 September 2026·4 min read

How does tax planning change as your income rises?

In short: Each Income Tax band has its own planning points, from Marriage Allowance below £12,570 to the loss of the Personal Allowance between £100,000 and £125,140. Pensions feature in most of them.

The UK tax system rewards people who understand it.

The more you earn, the more tax planning has to offer.

The bands below are the ones gov.uk gives for 2026 to 2027 for someone with the standard Personal Allowance. Income Tax bands are different if you live in Scotland.

What can you do if you earn under £12,570?

This sits within your personal allowance, so there's little to plan around.

If you're married, you can transfer part of your unused personal allowance to your spouse to reduce their bill.

This is Marriage Allowance, and it covers civil partners as well. Gov.uk says it lets you transfer £1,260 of your Personal Allowance, which reduces your partner's tax by up to £252 in the tax year. Your partner has to pay Income Tax at the basic rate, which usually means an income between £12,571 and £50,270. You cannot claim it if you live together but are not married or in a civil partnership.

What reduces your tax in the basic rate band?

The basic rate band runs from £12,571 to £50,270, taxed at 20%.

Pension contributions, charitable donations, and investing via EIS/SEIS schemes can all reduce your income tax bill, potentially wiping it out entirely.

Each works differently. On pensions, gov.uk says you can get tax relief on private pension contributions worth up to 100% of your annual earnings, either because your employer takes the contribution out of your pay before deducting Income Tax, or because your provider claims 20% and adds it to your pot. On donations, Payroll Giving is taken before Income Tax, while under Gift Aid it is the charity that claims an extra 25p for every £1 you give.

On the venture capital schemes, HMRC's guidance gives Income Tax relief of 30% of the investment for the Enterprise Investment Scheme and 50% for the Seed Enterprise Investment Scheme. You can only claim the relief against the Income Tax you need to pay, and unused relief cannot be carried forward to future tax years. HMRC also says an advance assurance letter is not an endorsement or an indication of investment performance.

What changes in the higher rate band?

The higher rate band runs from £50,271 to £125,140, taxed at 40%.

Every £1 into your pension saves 40p in tax.

Where your provider has already claimed the first 20%, gov.uk says you can claim additional relief of 20% through your Self Assessment tax return, up to the amount of income you have paid 40% tax on.

If you have children, watch the £60,000 threshold: once one parent earns above that, you start repaying Child Benefit, and it's gone completely by £80,000.

The charge is 1% of your Child Benefit for every £200 of income over the threshold. The income that counts is adjusted net income, which gov.uk describes as total taxable income less certain tax reliefs, such as pension contributions and Gift Aid. The detail is in the High Income Child Benefit Charge.

Between £100,000 and £125,140, your personal allowance is gradually withdrawn too, creating an effective marginal rate north of 60%.

Gov.uk puts the mechanism this way: your Personal Allowance goes down by £1 for every £2 that your adjusted net income is above £100,000, so it is zero at £125,140 or above. Each extra £1 in that range is taxed at 40% and also brings another 50p into tax at 40%. See the 60 percent tax trap.

This is where planning becomes genuinely crucial, and a £10,000 pension contribution in this band can save you around £6,000 in tax.

What about income above £125,140?

Above £125,140 the additional rate of 45% applies, and gov.uk says you do not get a Personal Allowance on taxable income over that figure.

This is where ISAs, limited company structures, and business expense planning become even more valuable.

Two limits are worth knowing at this level. Gov.uk gives £20,000 as the most you can save in ISAs in the 2026 to 2027 tax year. The pension annual allowance is £60,000, but HMRC says it is reduced if your threshold income is over £200,000 and your adjusted income is over £260,000. On the company side, see how to reduce your Corporation Tax.

Wherever you sit, understanding your own numbers is the first step to keeping more of what you earn.

Rates and thresholds can change, so always check your specific position with a tax adviser.

This is general information rather than advice on your own facts. If you want your position looked at, see how we work or talk to us.

Common questions

Gov.uk gives the Personal Allowance as up to £12,570 at 0%, the basic rate as £12,571 to £50,270 at 20%, the higher rate as £50,271 to £125,140 at 40% and the additional rate as over £125,140 at 45%. These assume the standard Personal Allowance, and the bands are different in Scotland. See [Income Tax rates and Personal Allowances](https://www.gov.uk/income-tax-rates).

Gov.uk says your Personal Allowance goes down by £1 for every £2 that your adjusted net income is above £100,000. That means the allowance is zero if your income is £125,140 or above. See [Income Tax rates and Personal Allowances](https://www.gov.uk/income-tax-rates).

Gov.uk says that from the 2024 to 2025 tax year onwards, if you or your partner earn more than £60,000 a year you have to pay some of your Child Benefit back, and all of it at £80,000 or more. You pay back 1% for every £200 you earn over the threshold. See [High Income Child Benefit Charge](https://www.gov.uk/child-benefit-tax-charge).

Gov.uk says that if you pay Income Tax above 20% and your pension provider claims the first 20% for you, you can claim additional relief on your Self Assessment tax return. In England, Wales and Northern Ireland that is 20% up to the amount of any income you have paid 40% tax on. See [Tax on your private pension contributions: tax relief](https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief).