Understanding your UK take-home pay involves three main deductions from your gross salary: income tax (PAYE), National Insurance (NI), and optionally pension contributions and student loan repayments. This guide walks through the exact calculation using 2025/26 rates.
For instant results, use our UK Salary Calculator — but if you want to understand exactly how the numbers work, read on.
Step 1 — Start With Gross Salary
Your gross salary is your annual pay before any deductions. This is what appears in your employment contract. If you're paid monthly, multiply by 12. If weekly, multiply by 52.
Step 2 — Subtract Pension Contributions (if applicable)
If you're enrolled in a workplace pension using salary sacrifice, your pension contribution reduces your gross pay before tax is calculated. This is the most tax-efficient arrangement because it also reduces your National Insurance.
If your scheme uses net pay or relief at source instead, your full gross salary is taxed and you receive pension relief later. The calculation below assumes salary sacrifice.
Example: £45,000 gross salary with 5% pension contribution = £45,000 × 0.95 = £42,750 pensionable/taxable pay.
Step 3 — Calculate Income Tax (PAYE)
UK income tax is progressive — you only pay each rate on the income within that band, not on your full salary. The 2025/26 bands for England, Wales and Northern Ireland are:
| Taxable Income | Rate |
|---|---|
| Personal Allowance (up to £12,570) | 0% |
| £12,571 – £50,270 | 20% (Basic Rate) |
| £50,271 – £125,140 | 40% (Higher Rate) |
| Over £125,140 | 45% (Additional Rate) |
Key point: The personal allowance of £12,570 is tax-free. Income tax applies only to the amount above this.
For a salary of £40,000: taxable income = £40,000 − £12,570 = £27,430. Tax = £27,430 × 20% = £5,486.
📊 Worked Example — £40,000 Annual Salary
Step 4 — Calculate National Insurance
Employees pay Class 1 National Insurance on earnings above the Primary Threshold (£12,570/year in 2025/26). The rates are:
- 8% on weekly earnings between £242 and £967 (£12,570–£50,270 annually)
- 2% on weekly earnings above £967 (above £50,270 annually)
For a £40,000 salary: NI = (£40,000 − £12,570) × 8% = £27,430 × 8% = £2,194.
Note: The example box above uses a slightly different figure due to weekly calculation rounding — HMRC calculates NI weekly, not annually.
Step 5 — Student Loan Repayments (if applicable)
If you have a student loan, repayments are made automatically through PAYE once your income exceeds the plan's repayment threshold:
- Plan 1 (pre-2012 English/Welsh, Scottish): £24,990/year — 9% above threshold
- Plan 2 (2012–2022): £27,295/year — 9% above threshold
- Plan 4 (Scotland): £31,395/year — 9% above threshold
- Plan 5 (post-2023): £25,000/year — 9% above threshold
- Postgraduate: £21,000/year — 6% above threshold
Step 6 — Calculate Net Monthly Take-Home Pay
Once you have annual deductions, divide by 12 for monthly, 52 for weekly, or 26 for fortnightly.
For the £40,000 example above: £32,298 ÷ 12 = £2,691.50 per month.
The Personal Allowance Trap (Over £100,000)
If you earn between £100,000 and £125,140, your personal allowance is tapered — it reduces by £1 for every £2 you earn above £100,000. At £125,140 the personal allowance is zero. This creates an effective 60% marginal tax rate on income between £100,000 and £125,140.
Making pension contributions is the most common way to restore the personal allowance. Pension contributions reduce your adjusted net income, potentially restoring all or part of your allowance.
Scottish Rates
Scottish taxpayers pay different income tax rates set by the Scottish Parliament. Scotland has six bands including a 19% starter rate and a 21% intermediate rate. National Insurance rates are the same for all UK taxpayers. Use the HMRC's Scottish income tax calculator for accurate Scottish figures.
Want instant calculations? Our UK salary calculator does all of this automatically for 2025/26.
Use the UK Salary Calculator →Summary of 2025/26 Key Rates
- Personal allowance: £12,570
- Basic rate (20%): £12,571 – £50,270
- Higher rate (40%): £50,271 – £125,140
- NI lower threshold: £12,570/year
- NI upper threshold (8% → 2%): £50,270/year
- Standard tax code: 1257L
These rates are based on 2025/26 HMRC guidance. Always verify with HMRC or a tax professional for complex situations including multiple jobs, benefits in kind, or non-standard income sources.