UK Tax Calculator Hub

Understanding the UK Tax System: A Complete Guide

The UK tax system is administered by HM Revenue and Customs (HMRC) and operates on a self-assessment basis for many taxpayers. The tax year runs from 6 April to 5 April the following year -- the current 2025/26 tax year began on 6 April 2025 and ends on 5 April 2026. Understanding how different taxes interact is essential for effective financial planning, whether you are an employee, self-employed professional, business owner, investor, or retiree.

Income Tax is the UK's primary revenue source, operating through a progressive system where different portions of your income are taxed at different rates. For 2025/26, the Personal Allowance remains frozen at £12,570 -- the amount you can earn tax-free. Income between £12,571 and £50,270 is taxed at the 20% basic rate, income from £50,271 to £125,140 at the 40% higher rate, and income above £125,140 at the 45% additional rate. This threshold freeze, often called "fiscal drag," has been in place since 2021 and is scheduled to continue until at least April 2028, gradually pulling more workers into higher tax bands as wages rise with inflation.

National Insurance Contributions (NICs) fund the state pension, NHS, and social security benefits. Employees pay Class 1 NICs at 8% on earnings between £12,570 and £50,270, then 2% above £50,270. Employers pay 15% (increased from 13.8% in April 2025) on employee earnings above the lowered Secondary Threshold of £5,000. Self-employed individuals pay Class 2 contributions at £3.50 per week and Class 4 at 6% on profits between £12,570 and £50,270, then 2% above. The combined effect of income tax and NI means most employees face an effective marginal rate of 28% in the basic rate band and 42% in the higher rate band.

Value Added Tax (VAT) is a consumption tax charged at 20% on most goods and services. Businesses with taxable turnover exceeding £90,000 (the 2025/26 threshold) must register for VAT. A reduced rate of 5% applies to specific items including domestic fuel and children's car seats, while essential goods like most food, children's clothing, and books are zero-rated. Understanding VAT is crucial for business owners managing cash flow, pricing strategies, and quarterly returns.

Beyond these main taxes, the UK system includes Capital Gains Tax on profits from selling assets (18% or 24% for all assets, with a reduced £3,000 annual exemption), Inheritance Tax at 40% on estates above the nil-rate band of £325,000 (plus a £175,000 residence nil-rate band for direct descendants), Stamp Duty Land Tax on property purchases, Corporation Tax at 19-25% for limited companies, and Dividend Tax at 8.75%, 33.75%, or 39.35% depending on your tax band. Scottish taxpayers operate under a separate income tax regime with five bands set by the Scottish Parliament, including a 19% starter rate and a 47% top rate.

How to Use Our Tax Calculators Effectively

Our tax calculators are designed to give you accurate, HMRC-compliant estimates for a wide range of tax scenarios. Here are practical tips for getting the most accurate results:

Income Tax Calculator: Enter your gross annual salary or total income from all sources. The calculator automatically applies the correct Personal Allowance (including tapering for income over £100,000) and shows your tax liability across each band. For the most accurate results, include pension contributions, Gift Aid donations, and other allowable deductions that reduce your taxable income. If you are a Scottish taxpayer, use our dedicated Scottish Income Tax Calculator which applies the five Scottish tax bands.

Salary Calculator: This tool provides a complete take-home pay breakdown including income tax, National Insurance, pension contributions, and student loan deductions. Enter your gross salary and select your payment frequency (annual, monthly, weekly, or hourly). The calculator shows your net pay across all time periods, making it invaluable for salary negotiations, job comparisons, and budgeting. For employers, the tool also estimates total employment cost including employer NI at the 2025/26 rate of 15%.

VAT Calculator: Choose whether to add VAT to a net amount or remove VAT from a gross amount. Select the applicable rate (20% standard, 5% reduced, or 0% zero-rated) and enter your figure. The calculator instantly shows the net amount, VAT amount, and gross total. This tool is essential for invoicing, expense claims, and checking receipts. For businesses using the Flat Rate Scheme, enter your industry's flat rate to see your simplified VAT liability.

Capital Gains Tax Calculator: Enter your purchase price, sale price, and any allowable costs (such as improvement expenditure or selling fees). Select whether the asset is a property or other asset, and your tax band. The calculator applies the £3,000 annual exempt amount and shows your CGT liability. Remember that your main residence is generally exempt from CGT through Private Residence Relief.

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