How the calculations work

Frozen is the real 2026/27 system. Indexed is the same system with the personal allowance and the basic-rate band raised each April by the previous September’s CPI inflation, starting from their April 2021 levels. That is how the tax rules raise them by default when a Chancellor doesn’t intervene. It gives an allowance of and a higher-rate line of for 2026/27. As the rules do, the allowance rounds up to the next £10 and the basic-rate band to the next £100 each year.

Left the same in both versions: the 20%, 40% and 45% rates, the £100,000 point where the allowance starts to shrink, the £125,140 additional-rate point, and National Insurance (8% between £12,570 and £50,270, 2% above). National Insurance thresholds are frozen too, but they are held constant here so the comparison isolates income tax.

Pay then and now: the salary you would need today is your old salary multiplied by the latest CPI index ( for ) and divided by the average CPI index for the year you pick. The result is rounded to the nearest £10.

Who it covers: employees in England, Wales and Northern Ireland with a standard tax code. Scotland has different rates and bands. The comparison at the top leaves out pensions, student loans, benefits, savings and dividends. The adjusted net income calculator adds pensions, Gift Aid and other pay you sacrifice.

Adjusted net income: start with your taxable pay, which is your pay minus anything you sacrifice or pay under a net pay arrangement, plus other income. Then take off Gift Aid donations and relief-at-source pension payments, each grossed up by 25% (£80 paid becomes £100). The tax estimate uses today’s frozen thresholds. It widens the 20% and 40% bands by the grossed-up amounts, as HMRC does, and withdraws the allowance by £1 for every £2 of adjusted net income over £100,000. National Insurance is charged on pay after any salary sacrifice, but not after a net pay arrangement.

Childcare and Child Benefit: Tax-Free Childcare and the 30 funded hours are lost if either parent’s adjusted net income is over £100,000. Funded hours start at 9 months. Above that line you keep 15 of the 30 hours for children aged 3 and 4, and none for younger children. Child Benefit is £27.05 a week for the eldest child and £17.90 for each other child. The charge takes back 1% for every £200 of the higher earner’s adjusted net income over £60,000, and all of it at £80,000. The true cost starts from your fees before help. Funded hours come off first, valued at your provider’s hourly rate and capped at your fees, and Tax-Free Childcare then adds 20p for every 80p you pay on what is left, up to £2,000 a child. The childcare values are estimates from the figures you enter, not quotes.

Bonus and commission: the calculator takes your pay month by month on a standard 1257L tax code. Each month you build up one twelfth of the personal allowance and basic-rate band, and tax is worked out on your pay so far this year (the taxable pay to date from your payslip, which already reflects any pay rise), so a bonus paid early in the tax year can be taxed at 40% on the payslip even when your pay for the whole year stays in the 20% band. The extra comes back as lower tax in later months. If the income tax you have actually paid so far differs from what your code expects on that pay, the difference is corrected on the payslip your bonus arrives in (a Month 1 or Week 1 code does not do this). The “once the tax year settles” column taxes your whole year’s pay in one go, taking pay so far plus your current salary for the remaining months, including the £100,000 allowance withdrawal, which payroll does not apply during the year. National Insurance (8% between £1,048 and £4,189 a month, 2% above) and student loan (9% above the plan threshold, 6% for a postgraduate loan, using thresholds of £26,900 for Plan 1, £29,385 for Plan 2, £33,795 for Plan 4, £25,000 for Plan 5 and £21,000 for postgraduate) are charged on each month’s pay on its own. Pension contributions are taken as a percentage of gross pay under one of three methods. Salary sacrifice comes off pay before tax, National Insurance and student loan. A net pay arrangement comes off before tax only. Relief at source is paid from net pay at 80%, with the provider adding 20%, and the calculator extends your basic-rate band by the gross contribution to give higher-rate relief in the “once the tax year settles” figure. Tax codes are read as a tax-free allowance (the number times ten, ignoring HMRC’s £9 rounding), a K code, 0T, or a flat rate (BR 20%, D0 40%, D1 45%, NT none), and codes ending in W1, M1 or X tax each month on its own. The “tax still to be collected or refunded” box compares the tax payroll will collect over the year on your code with the tax you owe for the year, assuming the same code all year and, for flat and 0T codes, that this is your only income. Other income, benefits in kind and Gift Aid are not included.

Other estimates differ a little. Using a different inflation measure or start date moves the figures slightly. The Office for Budget Responsibility estimates that by 2030/31 the allowance would be £4,920 higher and the higher-rate threshold £20,120 higher had both kept pace with inflation. This page is an illustration, not tax advice.