How Much Can I Earn Before Paying 40% Tax? UK Guide

If you’re earning more and approaching the higher tax bracket, you might wonder: At what income level do I start paying 40% tax? This guide explains the 40% tax threshold, how it works, ways to reduce your tax bill, and whether you pay 40% on all your income.

What is the 40% Tax Bracket?

The 40% tax bracket, also known as the higher rate of income tax, applies to income above a certain threshold. For the 2024/25 tax year, you start paying 40% tax on earnings over £50,270.

UK Income Tax Bands for 2024/25

• Personal Allowance: Up to £12,570: 0%Basic Rate

• £12,571 - £50,270: 20%Higher Rate

• £50,271 - £125,140: 40%Additional Rate

• Over £125,140: 45%

How Much Do I Have to Earn to Be in the 40% Tax Bracket?

You start paying 40% tax on earnings above £50,270. However, this doesn’t mean all your income is taxed at 40%—only the portion above the threshold.

Example: Someone Earning £60,000 per Year

• The first £12,570 is tax-free (Personal Allowance).

• The next £37,700 (£12,571 - £50,270) is taxed at 20% = £7,540.

• The remaining £9,730 (£60,000 - £50,270) is taxed at 40% = £3,892.

Total Tax Paid: £11,432 (not 40% of £60,000).

The Impact of the 40% Tax Bracket

Moving into the higher tax band means:

• A larger portion of your income is taxed at 40%.

• You may lose certain benefits, such as child benefit (if earning over £50,000).

• More National Insurance contributions may be required.

• You might need to file a Self-Assessment tax return if you have multiple income sources.

Does the 40% Tax Bracket Ever Change?

Yes, the higher-rate tax threshold can change depending on government policy.

• The £50,270 threshold has been frozen since 2021 and is expected to remain unchanged until at least 2028.

• If inflation rises but the tax threshold stays the same, more people will move into the 40% bracket over time.

What Does the Marginal Tax Rate Mean?

A marginal tax rate is the percentage of tax you pay on the next pound you earn.

• If you earn £50,269, your marginal tax rate is 20%.

• If you earn £50,271, your marginal tax rate becomes 40%—but only on the £1 above the threshold.

Will I Pay 40% Tax on All My Earnings?

The higher tax rate only applies to income above £50,270. Your first £50,270 is taxed at lower rates.

What Can I Do to Reduce My Taxes If I’m in the Higher Rate?

Even if your income exceeds £50,270, there are ways to legally reduce your taxable income and lower your tax bill.

1. Increase Pension Contributions

Contributions to a workplace or private pension are tax-free, so increasing your pension payments reduces your taxable income.

• If you earn £55,000, contributing £5,000 to your pension reduces taxable income to £50,000, keeping you below the 40% bracket.

2. Use Salary Sacrifice Schemes

Salary sacrifice arrangements—such as cycle-to-work schemes, childcare vouchers, or electric car schemes—reduce your taxable salary.

3. Claim Work-Related Expenses

If you work from home, buy work equipment, or travel for business, you may be able to claim tax relief.

4. Transfer Unused Personal Allowance (Marriage Allowance)

If your spouse earns below £12,570, you can transfer £1,260 of your personal allowance to reduce your tax bill.

5. Make Charitable Donations

Gift Aid donations reduce taxable income, potentially keeping you below the 40% threshold.

6. Check Your Tax Code

If you think you are overpaying tax, check your tax code on your payslip and contact HMRC if it looks incorrect.

Final Thoughts

You start paying 40% tax on income over £50,270, but only on earnings above this amount. You can reduce your tax liability by making pension contributions, salary sacrifices, or using tax allowances.

If you think you’re overpaying tax, check your tax code and speak to HMRC to ensure you’re being taxed correctly.