The short version: Higher rate tax is the 40% Income Tax band. You pay it on earnings above the basic rate threshold but below the additional rate threshold. Check gov.uk for the exact figures as they can change.
How does it work?
UK Income Tax is charged in bands. You don’t pay 40% on everything you earn, only on the portion that falls into the higher rate band. Your first chunk is tax free (the Personal Allowance), the next chunk is taxed at the basic rate, and only what’s left above that gets taxed at 40%.
Do I need to do anything differently?
If you’re employed and only have salary income, your employer handles it through PAYE. But higher earners sometimes need to file Self Assessment, especially if you have other income sources, want to claim certain reliefs, or earn above specific thresholds.
What else changes at higher rate?
Some tax reliefs and allowances work differently for higher rate taxpayers. Your Personal Savings Allowance is smaller. You can claim extra relief on pension contributions and Gift Aid donations. And you might start losing your Personal Allowance entirely once you earn above a certain level.
Moved into higher rate tax and want to make sure you’re being tax efficient? Talk to us about planning your finances.
