2026/27 Tax Year
How Much Tax Will I Pay on a Pay Rise?
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By Rasika F.
Updated July 2026 • PayToolkit
Quick Answer
If your pay rise stays within the basic rate band, you'll keep around 68-70% of it after tax and National Insurance. If it pushes part of your income above £50,270, that portion is taxed more heavily and you'll keep closer to 58% of it.
How Extra Salary Is Taxed
A pay rise simply increases your taxable income for the year. The extra amount is taxed at your marginal rate — the rate that applies to your next pound of income — not your average rate across all your earnings.
Watch Out for These Thresholds
- £50,270 — higher rate threshold, tax jumps from 20% to 40% above this
- £100,000 — Personal Allowance starts tapering away, creating an effective ~60% marginal rate
- £125,140 — Personal Allowance fully gone, additional rate (45%) starts here too
Worked Example
You earn £48,000 and get a £5,000 rise to £53,000. The first £2,270 of the rise (up to £50,270) is taxed at the basic rate; the remaining £2,730 is taxed at the higher rate. Overall, you'll keep noticeably less than 70% of the total rise because part of it crosses into the 40% band.
Ways to Reduce the Tax Impact
- Increase pension contributions, especially if the rise pushes you over £50,270 or £100,000
- Use salary sacrifice for pension or other qualifying benefits if your employer offers it
- Check whether the rise affects Child Benefit or other income-tested entitlements
Frequently Asked Questions
How much of my pay rise will I actually keep?
Around 68-70% if it stays within the basic rate band, or closer to 58% for the portion above £50,270.
Does a pay rise change my tax code?
Not usually, unless it takes you over £100,000, where the Personal Allowance taper may prompt a code adjustment.
What happens if my pay rise takes me over £100,000?
Your Personal Allowance reduces by £1 for every £2 over £100,000, creating an effective marginal rate of around 60% until £125,140.
Can I reduce the tax on a pay rise?
Increasing pension contributions can lower your taxable income, particularly valuable near the £50,270 and £100,000 thresholds.