What is Additional Rate Tax? UK Definition 2026/27
Quick Answer
The highest UK income tax rate of 45% on earnings above £125,140.
Definition of Additional Rate Tax
The additional rate is the highest band of UK income tax, charged at 45% on taxable income exceeding £125,140 in 2026/27. This threshold was reduced from £150,000 in April 2023, bringing approximately 250,000 more taxpayers into the additional rate band.
At this income level, your Personal Allowance has been completely eliminated due to the taper that removes £1 of allowance for every £2 earned above £100,000. This means every pound earned above £125,140 is taxed at 45%.
Additional rate taxpayers also face higher rates on dividends (39.35%) and lose their Personal Savings Allowance entirely (£0, compared to £1,000 for basic rate taxpayers). National Insurance continues at 2% above the Upper Earnings Limit.
Additional Rate Tax — Key Facts for 2026/27
| Additional Rate | 45% |
| Threshold 2026/27 | Above £125,140 |
| Personal Allowance | £0 (fully tapered) |
| Dividend Rate | 39.35% |
| Savings Allowance | £0 |
How Additional Rate Tax Works — Example
- 1Personal Allowance: £0 (tapered away above £125,140)
- 2Basic Rate (20%): £37,700 × 20% = £7,540
- 3Higher Rate (40%): £87,440 × 40% = £34,976 (£50,271 to £125,140)
- 4Additional Rate (45%): £24,860 × 45% = £11,187 (above £125,140)
- 5Total Income Tax: £53,703
- 6Plus NI: ~£5,500
- 7Take-home (before pension): ~£90,800
How Additional Rate Tax Affects Your Tax
Additional rate taxpayers pay the highest marginal tax rate in the UK. Combined with 2% National Insurance, the effective marginal rate is 47% on employment income. Tax planning strategies like pension contributions become particularly valuable as they reduce taxable income at this high marginal rate - a £10,000 pension contribution saves £4,500 in tax.
Official HMRC Guidance on Additional Rate Tax
For official guidance, refer to HMRC's documentation. Tax rules can change, so always verify current rates and thresholds on gov.uk.
HMRC: Income Tax rates and bandsFrequently Asked Questions about Additional Rate Tax
Related Tax Terms
Higher Rate Tax
The 40% UK income tax rate on earnings between £50,271 and £125,140.
Personal Allowance
The amount you can earn tax-free each year - £12,570 for 2026/27.
Income Tax
Tax paid on your earnings, pensions, and other income at 20%, 40%, or 45%.
Marginal Tax Rate
The tax rate you pay on your next pound of income.
Accuracy Note
This information is for guidance only and is based on 2026/27 tax year rates. Tax rules are complex and your circumstances may differ. For personal advice, consult a qualified accountant or tax adviser.