UK Salary Explained: Tax, National Insurance, and Take-Home Pay

A UK salary is quoted gross — the amount before anything is taken off — and paid net, after income tax, National Insurance, and any pension contribution or student loan repayment. The gap between the two is not a single percentage. Income tax is charged band by band, so only the slice of pay inside each band is charged at that band’s rate. National Insurance runs on its own thresholds, at its own rates, and it is worked out per pay period rather than over the whole year. A pension contribution changes both calculations, and a student loan adds a third deduction on top. Once you can see the three layers separately, any payslip makes sense, and any salary offer can be compared on the only figure that matters: what actually reaches your bank account.

How UK pay is taxed: PAYE, bands, and the personal allowance

Most employees pay income tax through PAYE — Pay As You Earn. Your employer deducts tax from each pay packet using your tax code, and sends it to HMRC. PAYE is designed to collect roughly the right tax over the year, pay period by pay period, without a tax return for most employees. It is an estimate, refined as the year goes on: if your pay changes, the deduction changes with it, and an over- or underpayment is usually corrected in a later payslip or through your tax code.

The standard personal allowance for 2026/27 is £12,570: the amount of income you can earn before paying income tax. It is not a separate payment or a rebate; it is simply the first slice of income charged at 0%. The allowance is set by your tax code — 1257L is the standard code, where 1257 means £12,570 with the last digit dropped, and L means the standard allowance applies. Other codes mean something different: BR taxes all pay at the basic rate, D0 at the higher rate, 0T gives no allowance at all. If your code is wrong, your tax will be wrong, and the fix is through HMRC or your personal tax account, not through your employer.

Above the allowance, income tax is charged in bands, and each band taxes only the income inside it. For 2026/27, in England, Wales, and Northern Ireland:

The bands are frozen: the allowance and the thresholds have not moved since 2021 and are frozen through 2030/31, so as wages rise, more pay is pulled into higher bands each year. That freeze is why a salary that felt comfortably basic-rate a few years ago can now spill into the higher rate without any change in real spending power. The thresholds in the table assume the full personal allowance; where the allowance is reduced — over £100,000, or under a non-standard tax code — the band boundaries move with it, because the bands are defined on taxable income after the allowance.

Worked example: a £35,000 salary, step by step

Take a £35,000 salary in England, Wales, or Northern Ireland, on the standard 1257L code, with no pension contribution and no student loan. The calculation has three steps, and each step uses only its own slice.

Step one, income tax. Subtract the allowance: £35,000 − £12,570 = £22,430 of taxable income. All of it sits inside the basic-rate band, which holds £37,700 of taxable income, so the whole £22,430 is charged at 20%: £4,486.00 of income tax. Step two, National Insurance: 8% on earnings between £12,570 and £50,270, which is the same £22,430 slice, giving £1,794.40. Step three, take-home pay: £35,000 − £4,486.00 − £1,794.40 = £28,719.60 a year, or £2,393.30 a month. The combined deduction is 17.9% of gross pay — not 20%, not 28% — because the allowance shelters the first £12,570 from both charges.

Check the £50,000 row against the bands. Taxable income is £50,000 − £12,570 = £37,430, which sits entirely inside the £37,700 basic-rate band, so the whole amount is charged at 20%: £7,486. At £60,000, taxable income is £47,430: the first £37,700 at 20% is £7,540, and the remaining £9,730 at 40% is £3,892, giving £11,432. The worked examples in UK Take-Home Pay, Worked Examples run the same method at £30,000, £60,000, and £100,000, and in Scotland. For salaries with other income on top — dividends, savings interest, rent — the Tax Calculator UK adds those layers, which this salary calculation does not cover.

National Insurance: the second deduction explained

National Insurance is not a second income tax, though it feels like one on a payslip. It is a separate contribution, calculated on gross earnings with its own thresholds, and it buys entitlement: a National Insurance record builds the state pension and certain benefits. Employees pay Class 1 National Insurance. For 2026/27 the rates are 8% on earnings between the primary threshold of £12,570 a year and the upper earnings limit of £50,270, and 2% on everything above the upper earnings limit. Below £12,570 you pay nothing, though earnings above the lower earnings limit still count toward your record.

Two features surprise people. First, National Insurance is worked out per pay period — weekly or monthly — not over the whole year, so a single large payment in one month can attract National Insurance at rates that a smoothed annual figure would not suggest, and there is no annual reconciliation the way there is for income tax. Second, the rate falls at the top: once earnings pass £50,270, the employee rate drops from 8% to 2%, so the combined marginal deduction for a higher-rate taxpayer is 42% (40% tax plus 2% National Insurance), and for an additional-rate taxpayer 47% (45% plus 2%). National Insurance is the same across the whole UK — Scotland’s different income tax bands do not change it.

Your employer pays National Insurance too, and it is not a small amount. For 2026/27 employers pay secondary Class 1 contributions at 15% on earnings above the secondary threshold of £5,000 a year, with no upper limit. On a £60,000 salary that is 15% × £55,000 = £8,250, making the total cost of employing you £68,250 before pension contributions and any other costs. Eligible employers can offset up to £10,500 of that bill with the Employment Allowance. The employer charge never appears on your payslip, but it matters whenever you negotiate salary: a £5,000 rise costs your employer £5,750, and a salary-sacrificed pension contribution saves the employer 15% as well as saving you tax and National Insurance, which is why some employers share that saving with you.

The £100,000 taper: the 60% slice

Above £100,000 of adjusted net income, the personal allowance is reduced by £1 for every £2 of extra income, until it reaches zero at £125,140. The taper does not change the headline rates — the bands still read 20%, 40%, 45% — but it changes how much income is taxable, and the effect is a 60% effective marginal rate across the whole taper zone.

Work it through. At £100,000 with the full allowance, taxable income is £87,430. At £101,000, the allowance has fallen by £500 to £12,070, so taxable income is £88,930 — £1,500 more, from £1,000 of extra pay. All of that extra taxable income sits in the 40% band, so the extra tax is £600, and National Insurance at 2% above the upper earnings limit adds £20. The £1,000 rise leaves £380 of take-home pay: a 62% marginal deduction. The same arithmetic holds all the way to £125,140, where the allowance is gone and the marginal rate drops back to 42% (40% tax plus 2% National Insurance). The taper zone is therefore the worst place in the system to receive extra pay — and the best place for a pension contribution or a salary sacrifice, because each sacrificed pound also restores 50p of allowance.

Scotland: six bands instead of three

Scottish taxpayers pay Scottish income tax rates on earnings (employment, self-employment, and pension income), set by the Scottish Government. For 2026/27 there are six bands, with the same £12,570 personal allowance and the same £100,000 taper as the rest of the UK. Savings and dividend income stay on UK-wide rates even for Scottish taxpayers, and National Insurance is unchanged.

On the same £35,000 salary, a Scottish taxpayer pays £4,501.07 of income tax against £4,486.00 in England — only £15.07 more, because the lower bands nearly cancel out. At £60,000 the gap is much larger: Scottish income tax is £13,182.05 against £11,432.00, a difference of £1,750.05, because the 42% higher rate starts at £43,663 instead of £50,270. The crossover sits at about £33,500 of salary: below it, Scotland is marginally cheaper, because the 19% starter rate outweighs the 21% intermediate rate; above it, Scotland is progressively more expensive. Whether you are a Scottish taxpayer depends on where you live, not where you work — it follows your main residence — and the S prefix on your tax code (for example S1257L) shows that Scottish rates apply.

Reading your payslip: tax codes, periods, and what PAYE cannot see

A payslip shows gross pay, each deduction, and net pay, plus year-to-date totals. The figures to check every month are the tax code, the taxable pay, and the tax deducted. The tax code tells you what allowance PAYE is using: 1257L is standard, S1257L is the Scottish equivalent, and a code with a different number means a different allowance — from Marriage Allowance, a company car, or an underpayment being collected. A code ending in M means you receive part of your partner’s allowance; T means HMRC cannot determine your code and your employer uses what it has. If the code looks wrong, the deduction will be wrong in the same direction, every month, until it is fixed.

Pay periods matter because National Insurance and, in practice, PAYE respond to the period’s pay. A bonus paid in one month is taxed in that month at the marginal rate for the pay in that period, and National Insurance is charged on that month’s earnings above the period thresholds. There is no separate bonus tax rate — a bonus is ordinary income, taxed when paid. Over a full year, PAYE usually self-corrects through the cumulative calculation, but a bonus in the final pay period, or a job change mid-year, can leave a balance to settle through your tax code or a tax return.

PAYE cannot see what it is not told. A second job is usually taxed at BR (basic rate on all pay) because the allowance has already been used on the first job, which over-collects if the second job’s pay stays inside the basic-rate band overall and under-collects if total income reaches the higher rate — either way, the year-end position is settled through your tax code or Self Assessment. Pension income alongside work, rental income, and savings interest are likewise outside PAYE, which is why higher earners and people with several income sources often need a tax return even though their employment tax is handled at source.

Pensions, student loans, and other deductions

Pension contributions are the largest voluntary deduction, and the method matters as much as the amount. Under salary sacrifice, your contractual pay is reduced and your employer pays the contribution directly: no income tax and no National Insurance on the sacrificed amount. Under a net pay arrangement, the contribution comes out of gross pay before tax, saving income tax but not National Insurance. Under relief at source, the contribution comes out of net pay and the pension scheme claims basic-rate relief, grossing the contribution up by 25% and extending your basic-rate band. On a £50,000 salary with a £2,500 contribution, salary sacrifice leaves £200 more in cash plus pot than either other method, because it alone saves the 8% National Insurance. The full comparison, and what changes at higher incomes, is in Salary Sacrifice Explained and in the net-to-gross guide linked from the calculator page.

Student loan repayments are a percentage of pay above a threshold for your plan, taken alongside tax: 9% above £26,900 for Plan 1, 9% above £29,385 for Plan 2, 9% above £33,795 for Plan 4 (Scotland), 9% above £25,000 for Plan 5, and 6% above £21,000 for a postgraduate loan, which can run on top of an undergraduate plan. These are 2026/27 thresholds. A student loan repayment is not a tax — it repays a loan — but it behaves like one on a payslip, reducing take-home pay by 9p in every pound above the threshold, and salary sacrifice reduces the pay it is calculated on, which is part of why sacrifice is worth more to graduates with loans than the tax saving alone suggests.

Other deductions follow their own rules. Marriage Allowance lets a partner earning below the personal allowance transfer £1,260 of allowance to a partner who pays basic-rate tax, worth £252 a year. The High Income Child Benefit Charge claws back Child Benefit where adjusted net income exceeds £60,000, at 1% of the benefit per £200 of income between £60,000 and £80,000 — it is collected through Self Assessment, not the payslip, and pension contributions and salary sacrifice reduce the income it is measured on. Benefits in kind, such as a company car or private medical insurance, change your tax code rather than appearing as a payslip deduction, and the calculator on this site does not model them.

Mistakes: marginal rates, monthly figures, and second jobs

The commonest mistake is reading a marginal rate as an average rate. Moving into the 40% band does not tax all your pay at 40% — it taxes only the slice above £50,270 at 40%, and the slices below keep their lower rates. A £55,000 salary pays 40% on £4,730 of income and 20% or 0% on the rest. The same error in reverse — assuming a £60,000 salary is “taxed at 40%” — overstates the bill by thousands and makes every salary negotiation look worse than it is.

The second mistake is treating a monthly figure as exact. Annual salary divided by twelve is a display convention, not how PAYE works: tax is cumulative, National Insurance is per period, and a month with overtime, a bonus, or unpaid leave will differ from the smoothed figure. Use monthly figures for budgeting and annual figures for decisions. The third mistake is comparing gross salaries across regions without adjusting for bands: £60,000 in Scotland and £60,000 in England are different net salaries by £1,750.05, and a salary quoted with a pension contribution, a car, or a bonus attached is not comparable to a bare salary at all until each element is priced.

Finally, do not assume the calculator’s answer is the final word. It applies the official 2026/27 bands, thresholds, and pension and student loan rules, but it cannot see benefits in kind, multiple employments, or other income, and it treats the year as a single annual calculation. For an exact figure, check your personal tax account on GOV.UK, where HMRC shows the code and the estimate it is actually using.

Frequently asked questions