Your gross salary and your take-home pay can differ by thousands of pounds. Understanding the deductions between the two helps you plan your finances, negotiate pay rises, and make the most of tax-efficient options like pension contributions and salary sacrifice.
This guide explains every step of the calculation for England, Wales and Northern Ireland (rUK) in 2026/27. For Scotland, where different income tax rates apply, see our Scottish income tax guide.
1. Start with your personal allowance
The personal allowance is the amount you can earn before income tax starts. For 2026/27 it remains at £12,570 — frozen at this level until April 2031.
If you earn over £100,000, your personal allowance is gradually reduced. For every £2 earned above £100,000, you lose £1 of allowance. At £125,140, the allowance disappears entirely.
Not financial advice. This guide uses 2026/27 rates from HMRC and is for general information only. Your own position depends on your circumstances. Source: gov.uk/income-tax-rates.
2. Income tax bands (England, Wales and Northern Ireland)
Once your income exceeds the personal allowance, income tax applies in bands:
| Band | Gross income | Rate | |---|---|---| | Personal allowance | Up to £12,570 | 0% | | Basic rate | £12,571 – £50,270 | 20% | | Higher rate | £50,271 – £125,140 | 40% | | Additional rate | Over £125,140 | 45% |
Tax is calculated on slices of income falling in each band — not as a flat percentage of all your earnings.
Example: On a gross salary of £50,000, you pay:
- 0% on the first £12,570 = £0
- 20% on £37,430 (£50,000 − £12,570) = £7,486
Total income tax: £7,486.
Wales has identical rates to England for 2026/27 (the Welsh Government sets the Welsh Rate of Income Tax to deliver parity). Northern Ireland also uses UK rates — there is no devolved income tax in Northern Ireland.
3. National Insurance
National Insurance (NI) is a separate deduction — it is not the same as income tax. For employees (Class 1, Category A), the 2026/27 rates are:
| Earnings | Rate | |---|---| | Up to £12,570 (Primary Threshold) | 0% | | £12,571 – £50,270 (Upper Earnings Limit) | 8% | | Above £50,270 | 2% |
NI is calculated on gross earnings (not taxable income) and does not benefit from the same kind of allowance taper as income tax above £100,000.
Example: On a £50,000 salary, employee NI is 8% on £37,700 (£50,270 − £12,570) = £3,016. The remaining £729 (£50,000 − £50,270 is negative here, so NI stops at the UEL) gives a total of £2,994.40. (Worked precisely: 8% × (£50,270 − £12,570) = 8% × £37,700 = £3,016; plus 0% on the small amount above the UEL at exactly £50,000 salary — total £2,994.40 after banding correctly at £50,000).
Source: gov.uk rates and thresholds for employers 2026-to-2027.
4. Pension contributions
Pension contributions reduce your net pay, but they also attract tax relief. The method matters:
| Method | How it works | Basic-rate cost of £100 contribution | |---|---|---| | Relief at source | You pay 80%; provider claims 20% from HMRC | £80 net | | Net pay | Contribution deducted before tax is calculated | £80 net (saving made via reduced tax) | | Salary sacrifice | Gross salary reduced; saves income tax and NI | ~£69 net (saves NI too) |
Higher-rate and additional-rate taxpayers can claim extra relief through Self Assessment for relief-at-source pensions.
The annual allowance for 2026/27 is £60,000 (or 100% of your earnings, whichever is lower).
5. Student loan repayments
Student loan repayments are deducted from gross pay once you earn above your plan's repayment threshold:
| Plan | 2026/27 threshold | Rate | |---|---|---| | Plan 1 | £26,900 | 9% | | Plan 2 | £29,385 | 9% | | Plan 4 (Scotland) | £33,795 | 9% | | Plan 5 | £25,000 | 9% | | Postgraduate | £21,000 | 6% |
Repayments are on income above the threshold, not the full salary. They run alongside income tax and NI — they are separate deductions.
Source: gov.uk student loans terms 2026-to-2027.
6. Worked examples (2026/27, England)
These figures are verified against published HMRC rates:
| Gross salary | Income tax | Employee NI | Take-home | |---|---|---|---| | £25,000 | £2,486 | £994.40 | £21,519.60 | | £30,000 | £3,486 | £1,394.40 | £25,119.60 | | £50,000 | £7,486 | £2,994.40 | £39,519.60 | | £60,000 | £11,432 | £3,210.60 | £45,357.40 | | £100,000 | £27,432 | £4,010.60 | £68,557.40 |
Assumes: tax code 1257L, no student loan, no pension contribution, Category A NI.
For £60,000+, you enter the higher-rate (40%) band, so each extra pound of gross earnings costs you 40p in income tax plus 2p in NI — a marginal rate of 42%. Between £100,001 and £125,140, the effective marginal rate is around 60–62% due to the personal allowance taper.
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Enter your salary to see an exact breakdown of income tax, NI, pension and student loan deductions — updated for 2026/27.
7. Salary sacrifice and other deductions
Many employers offer salary sacrifice schemes — you agree to a lower gross salary in exchange for a non-cash benefit (typically pension, electric vehicle, cycle to work, or childcare). Because your gross salary is lower, you pay less income tax and less National Insurance. This is the most tax-efficient pension arrangement for most employees.
Note: from 6 April 2029, salary sacrifice pension contributions above £2,000 per year will become subject to NI — this does not affect the 2026/27 tax year.
Other deductions that may appear on your payslip include:
- Benefits in kind (company car, private medical) — these increase your taxable pay
- Cycle-to-work / childcare vouchers — reduce gross salary under salary sacrifice
- Season ticket loans — not a deduction, but reduces net pay each month
Related guides
- Scottish income tax explained (2026/27 bands) — Scotland uses six different SRIT bands
- Pension tax relief explained — how relief at source, net pay and salary sacrifice compare
- ISA vs savings account — where to put the money you save on tax