Higher Rate Taxpayer: What Does It Mean For Your Finances?

Over 7 million people are higher-rate tax payers in the UK, according to the latest government estimates.

If you’re in the 40% tax bracket or expect to be so soon, it’s important to understand how it impacts your finances.

It’s important to note that tax rules can change and any benefits are dependent on individual circumstances.

Here’s what you need to know.

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By Brean Horne
Published: July 22, 2026
Edited by: Antonia Medlicott
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Last Update: 1 week ago
3 min read

What is a higher-rate taxpayer?

You fall into the higher-rate taxpayer bracket when you earn between £50,271 – £125,140.

This means that the amount of money you earn in this bracket will be taxed at 40%. (It doesn’t apply to all of your earnings!)

Here’s how it breaks down:

	Earnings below £12,570	Earnings between £12,571 and £50,270	Earnings between £50,271 and £125,140*
Employed workers	No income tax, no NI	20% Income tax, 8% NI	40% income tax, 2% NI
Self-employed workers	No income tax, no NI	20% income tax, 6% NI	40% income tax, 2% NI
Anyone aged 66 or over	No income tax, no NI	20% income tax, no NI	40% income tax, No NI

For example, you earn a total of £55,000 each tax year you’ll pay:

0% tax on the first £12,570
20% tax on your earnings between £12,571 – £50,270
40% tax on your earnings between £50,271 – £55,000

So, in total, you’re only paying the 40% tax rate on £4,729 of your earnings.

How does being a higher-rate taxpayer affect your pension?

Higher-rate taxpayers are usually entitled to more tax relief on their pensions.

Pension tax relief is money you receive on top of your regular contributions by the government as an incentive for paying into a pension.

Higher-rate taxpayers can claim back a further 20% of pension contributions.

Here’s an an example of:

You pay £100 into your pension
You get £25 (basic rate tax relief)
You can claim an extra £25 (higher rate tax relief)

You can claim pension tax relief by submitting a self assessment tax return at the end of the tax year or using HMRC’s online services.

To claim tax relief using HMRC’s online service, you’ll need:

Your National Insurance number
The type of pension
The name of your pension provider
The net amount of pension contributions for each tax year
Proof of payments from your pension provider
Your payroll number or reference number

What happens after you claim?

You can claim the pension tax relief back as a:

tax rebate: HMRC sends you money back
reduction in your tax bill: your tax return shows you owe less
change to your tax code: you pay less tax in future months

Can you backdate pension tax claims?

It’s possible to backdate higher-rate pension tax relief claims for up to the last 4 years. It’s important to note that you’ll only be ab;e to claim for years that you were a higher earner.

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Higher-rate taxpayer personal savings allowance

The amount of tax-free interest you can earn (known as your personal savings allowance) reduces when you become a higher-rate taxpayer.

Currently you the following personal savings allowance rates apply to each tax bracket:

Basic-rate taxpayers (20%) – tax-free interest up to £1,000.
Higher-rate taxpayers (40%) – tax-free interest up to £500.
Additional-rate taxpayers (45% or higher) – no tax-free interest on savings.

If you’re a higher-rate taxpayer it might be worth considering a tax-efficient savings account such as a Cash ISA.