Higher Rate Tax

Definition

Higher Rate Tax (40%) applies to income above the basic rate band threshold — currently income over £50,270 in England, Wales, and Northern Ireland (Scotland has different bands). Once your income passes this point, every additional pound you earn within the higher rate band is taxed at 40% until you reach the additional rate threshold.

Why it matters

• Crossing into the higher rate band reduces pension tax relief on contributions to 40% and affects Child Benefit if your income exceeds £60,000.
• Knowing your marginal rate helps with bonus, overtime, and pension planning decisions.

Common use cases

• Checking if a pay rise pushes you into higher rate
• Calculating pension contribution tax relief
• Evaluating salary sacrifice options