Understanding Your Take Home Pay
Your take home pay is the amount you receive after all deductions have been made from your gross salary. In the United Kingdom, the Pay As You Earn (PAYE) system means your employer deducts income tax and National Insurance contributions directly from your wages before you are paid. Understanding how these deductions work is essential for financial planning, whether you are starting a new job, negotiating a salary, or simply want to know where your money goes each month.
How Income Tax Works in the UK
Income tax in the UK is calculated using a progressive system of tax bands. For the 2026/27 tax year, most people receive a personal allowance of £12,570, meaning you pay no tax on the first £12,570 you earn. Income between £12,571 and £50,270 is taxed at the basic rate of 20%, income between £50,271 and £125,140 at the higher rate of 40%, and anything above £125,140 at the additional rate of 45%. If you earn over £100,000, your personal allowance is gradually reduced by £1 for every £2 earned above that threshold, effectively creating a 60% marginal rate on income between £100,000 and £125,140. Scottish residents pay different rates set by the Scottish Parliament, with six income tax bands ranging from 19% to 48%. For more details, visit our UK tax FAQ page.
National Insurance Contributions
National Insurance (NI) is a separate contribution that funds state benefits including the State Pension, statutory sick pay, and maternity allowance. As an employee, you pay Class 1 NI at 8% on earnings between £12,570 and £50,270 per year, and 2% on earnings above £50,270. Unlike income tax, NI is calculated on a per-pay-period basis and there is no personal allowance taper. Your employer also pays NI on your behalf, but this does not affect your take home pay directly.
Tax Codes Explained
Your tax code tells your employer how much tax-free income you are entitled to. The standard code 1257L corresponds to the £12,570 personal allowance. The number in your tax code is multiplied by 10 to give your annual tax-free amount. If HMRC adjusts your tax code — for example, to account for benefits in kind or underpaid tax from a previous year — your take home pay will change accordingly. You can find your tax code on your payslip or on a P2 notice from HMRC.
Student Loan and Pension Deductions
If you have a student loan, repayments are deducted automatically through PAYE once your income exceeds the relevant threshold. Plan 1 repayments start at £24,990, Plan 2 at £27,660, Plan 4 (Scotland) at £31,395, Plan 5 at £25,000, and postgraduate loans at £21,000. Workplace pension contributions also reduce your take home pay but provide valuable long-term savings and tax relief. Under auto-enrolment, most employees contribute at least 5% of qualifying earnings. Use our calculator above to see how different pension contribution levels affect your monthly pay.
Compare With Other Countries
Curious how UK tax compares internationally? Try our Germany Brutto Netto Rechner to see how German income tax and social contributions compare, or our Ireland tax calculator for a comparison with the Irish PAYE system. Each country has its own approach to taxation and social contributions, and understanding the differences can be valuable for anyone considering working abroad.