Primary Threshold
The earnings level at which employees start paying National Insurance. For 2026/27, it is £12,570 per year (£242 per week). Below this threshold, no employee NI is due.
NI Calculator →UK Tax Glossary
Every key UK tax, salary and payroll term explained in plain English, with links to the relevant calculators.
A
Allowance (Personal Allowance)
The amount of income you can earn each year before paying income tax. For 2026/27, the Personal Allowance is £12,570. It reduces by £1 for every £2 earned above £100,000, disappearing entirely at £125,140.
Income Tax Calculator →Additional Rate
The highest band of income tax, charged at 45% on earnings above £125,140 (2026/27). By this point the Personal Allowance has been fully withdrawn, so every pound is taxed. In Scotland the top rate is 48% on income above £125,140.
Income Tax Calculator →Adjusted Net Income
Your total taxable income minus certain tax reliefs such as pension contributions and Gift Aid donations. HMRC uses adjusted net income to determine whether the Personal Allowance taper applies (starting at £100,000) and eligibility for the High Income Child Benefit Charge.
B
Basic Rate
The first band of income tax, charged at 20% on earnings between £12,571 and £50,270 (2026/27). In Scotland, different rates and bands apply, including the starter rate (19%), basic rate (20%), and intermediate rate (21%).
Income Tax Calculator →Bonus
A one-off payment on top of regular salary. Bonuses are taxed as normal income through PAYE. Because they are added on top of your existing earnings, they are often taxed at your highest marginal rate.
Bonus Tax Calculator →C
Class 1 National Insurance
The main National Insurance contributions paid by employees. For 2026/27, employees pay 8% on earnings between £12,570 and £50,270 (Primary Threshold to Upper Earnings Limit), then 2% on anything above.
NI Calculator →Child Benefit
A tax-free payment from HMRC for each child you are responsible for. The rate for 2026/27 is £26.05 per week for the eldest child and £17.25 for each additional child. If either parent earns over £60,000, the High Income Child Benefit Charge claws back 1% for every £200 above that threshold.
E
Employment Allowance
A relief that allows eligible employers to reduce their employer National Insurance liability by up to £10,500 per year (2026/27). Most small businesses with employer NI bills below £100,000 in the previous tax year can claim. It does not affect employee NI deductions.
Employer National Insurance
National Insurance contributions paid by your employer on top of your salary. For 2026/27, employers pay 15% on earnings above the Secondary Threshold (£5,000). This is not deducted from your pay.
Emergency Tax Code
A temporary tax code applied when HMRC does not have enough information about your income, often when starting a new job without a P45. Common emergency codes are 1257L W1 or 1257L M1. Under emergency tax you may overpay and need to reclaim via a P800 or Self Assessment.
G
Gross Pay
Your total earnings before any deductions. This is the headline salary figure in your contract. From gross pay, HMRC deducts income tax, National Insurance, and any student loan repayments via PAYE.
Salary Calculator →H
Higher Rate
The second band of income tax, charged at 40% on earnings between £50,271 and £125,140 (2026/27). Above £100,000, the Personal Allowance tapers away, creating an effective marginal rate of 60%.
Income Tax Calculator →HMRC
Her Majesty's Revenue & Customs, the UK government department responsible for collecting taxes and National Insurance, administering tax credits and child benefit, and enforcing customs regulations.
Hourly Rate
Your salary expressed per hour. Calculated by dividing your annual salary by total working hours (typically 52 weeks times contracted hours per week). The National Living Wage for 2026/27 is £12.21 per hour for workers aged 21+.
Hourly Rate Calculator →I
ISA (Individual Savings Account)
A tax-free savings or investment wrapper. Interest, dividends, and capital gains within an ISA are exempt from tax. The annual ISA allowance for 2026/27 is £20,000 across all ISA types (Cash, Stocks & Shares, Innovative Finance, Lifetime). The Lifetime ISA has a separate £4,000 sub-limit.
M
Marginal Tax Rate
The percentage of tax you pay on the next pound you earn. It differs from your effective (average) tax rate. Between £100,000 and £125,140, the marginal rate is effectively 60% due to the Personal Allowance taper. Understanding your marginal rate helps with decisions on overtime, bonuses, and pension contributions.
Salary Calculator →Marriage Allowance
A tax benefit allowing a non-taxpayer or basic rate taxpayer to transfer £1,260 (10% of the Personal Allowance) to their spouse or civil partner, saving up to £252 per year. Only available if neither partner pays higher rate tax.
N
National Insurance (NI)
A mandatory social security contribution deducted from earnings. It funds the State Pension, NHS, and other benefits. Employees pay Class 1 NI; self-employed pay Class 2 and Class 4. Your NI record determines your State Pension entitlement.
NI Calculator →National Living Wage
The legal minimum hourly rate for workers aged 21 and over. For 2026/27, it is £12.21 per hour. Lower rates apply for younger workers and apprentices. Employers must pay at least this rate.
National Minimum Wage
The minimum hourly pay rate set by the government for workers under 21 and apprentices. For 2026/27: £10.00 per hour for 18-20 year olds, £7.55 for under 18s, and £7.55 for apprentices. Workers aged 21 and over receive the National Living Wage instead.
Hourly Rate Calculator →Net Pay (Take-Home Pay)
The amount you actually receive in your bank account after all deductions (income tax, National Insurance, student loan, pension contributions) have been taken from your gross pay.
Take-Home Pay Calculator →P
P45
A document your employer gives you when you leave a job. It shows your total pay and the tax deducted in the current tax year. You hand it to your next employer so they can apply the correct tax code. Without a P45, your new employer may put you on an emergency tax code.
P60
An end-of-year certificate your employer must provide by 31 May after the tax year ends. It summarises your total pay, income tax, and National Insurance for the full tax year. You may need your P60 for Self Assessment, mortgage applications, or tax refund claims.
P11D
A form employers submit to HMRC listing the value of benefits in kind and expenses provided to employees, such as company cars, private medical insurance, and interest-free loans. The taxable value of these benefits is added to your income and collected through an adjustment to your tax code.
PAYE (Pay As You Earn)
The system HMRC uses to collect income tax and National Insurance directly from wages before the employee receives them. Employers calculate and deduct the correct amounts each pay period using tax codes and NI tables.
How PAYE Works Guide →Pension Auto-Enrolment
A legal requirement for employers to automatically enrol eligible workers into a workplace pension. The minimum total contribution is 8% of qualifying earnings (5% employee, 3% employer). Employees can opt out.
Pension Calculator →Pro-Rata Salary
A proportionally reduced salary for part-time workers. If the full-time equivalent salary is £30,000 for 37.5 hours per week, working 22.5 hours gives a pro-rata salary of £18,000 (22.5/37.5 of the full amount).
Pro-Rata Calculator →S
Salary Sacrifice
An arrangement where you agree to a lower gross salary in exchange for a non-cash benefit (usually pension contributions). Because your gross pay is reduced, you pay less income tax and National Insurance, making it more tax-efficient than relief at source.
Pension Calculator →Self Assessment
The system HMRC uses to collect income tax from people with income that is not taxed at source through PAYE. This includes self-employed individuals, company directors, landlords, and anyone earning over £150,000. The Self Assessment tax return must be filed by 31 January following the end of the tax year (31 October for paper returns).
Scottish Income Tax
Scotland sets its own income tax rates and bands for non-savings, non-dividend income. For 2026/27, Scotland has six bands (19%, 20%, 21%, 42%, 45%, 48%) compared to England's three (20%, 40%, 45%). Scottish taxpayers have tax codes prefixed with "S".
Salary Calculator →State Pension
A regular payment from the government once you reach State Pension age (currently 66, rising to 67 by 2028). The full new State Pension for 2026/27 is £221.20 per week. You need at least 35 qualifying years of National Insurance contributions for the full amount, and a minimum of 10 years to receive anything.
Statutory Maternity Pay (SMP)
Pay from your employer during maternity leave. For the first 6 weeks you receive 90% of your average weekly earnings. For the remaining 33 weeks you receive the lower of 90% of average earnings or the flat SMP rate (£187.18 per week for 2026/27). You must have worked for your employer for at least 26 weeks and earn at least £125 per week.
Statutory Sick Pay (SSP)
The minimum amount your employer must pay you when you are off work sick for four or more consecutive days. The SSP rate for 2026/27 is £118.75 per week, paid for up to 28 weeks. You must earn at least £125 per week to qualify. SSP is subject to income tax and National Insurance deductions.
Student Loan Repayment
Repayments deducted from earnings once you earn above the plan threshold. Plan 1: 9% above £24,990. Plan 2: 9% above £27,295. Plan 4 (Scotland): 9% above £31,395. Plan 5: 9% above £25,000. Postgraduate: 6% above £21,000. Deducted through PAYE.
Student Loan Calculator →T
Tax Code
A code used by employers to calculate how much income tax to deduct. The most common code is 1257L (2026/27), meaning a £12,570 tax-free allowance. Letters indicate your situation: L (standard), S (Scotland), BR (all taxed at basic rate), 0T (no allowance).
How PAYE Works →Tax Credits
Government payments made to working people on lower incomes and families with children. Tax credits are being replaced by Universal Credit, but some claimants remain on the legacy system. Working Tax Credit supplements low earnings, while Child Tax Credit supports families. New claims are now directed to Universal Credit.
Tax-Free Allowance
The total amount you can earn before paying income tax in a tax year. For most people this equals the Personal Allowance of £12,570 (2026/27). It may be higher if you receive Marriage Allowance or Blind Person's Allowance, or lower if you earn over £100,000 or have benefits in kind coded against it.
Income Tax Calculator →Tax Year
The UK tax year runs from 6 April to 5 April the following year. The current tax year is 2026/27 (6 April 2026 to 5 April 2027). All tax bands, thresholds, and allowances are set per tax year.
2026/27 Tax Year Guide →U
Universal Credit
A single monthly benefit payment replacing six legacy benefits (Income Support, income-based JSA, income-related ESA, Housing Benefit, Child Tax Credit, and Working Tax Credit). The amount you receive depends on your circumstances, income, and savings. It is reduced by 55p for every £1 you earn above your work allowance.
Upper Earnings Limit (UEL)
The earnings level above which the employee National Insurance rate drops from 8% to 2% (2026/27). Set at £50,270 per year (£967 per week), aligned with the higher rate tax threshold.
NI Calculator →W
Workplace Pension
A pension scheme arranged by your employer. Since auto-enrolment, all eligible employees must be offered a workplace pension. The minimum contribution is 8% of qualifying earnings (between £6,240 and £50,270), split as 5% from the employee and 3% from the employer. Contributions can be made via salary sacrifice or relief at source.
Pension Calculator →Updated for 2026/27 tax year