UK Salary Calculator 2025/26

How Your Take Home Pay is Calculated

Working out your take home pay involves several steps. Your employer deducts income tax, National Insurance contributions, student loan repayments, and pension contributions from your gross salary before you receive your net pay. Understanding each of these deductions helps you plan your finances and check that your payslip is correct.

The calculation follows a specific order. First, your gross annual salary is established. If you receive a monthly salary, this is multiplied by 12. If you are paid weekly, it is multiplied by 52. From this gross figure, any salary sacrifice pension contributions are deducted to arrive at your taxable pay.

Next, your personal allowance is applied. For 2025/26, the standard personal allowance is £12,570. This is the amount you can earn before any income tax is due. If your income exceeds £100,000, your personal allowance is reduced by £1 for every £2 above this threshold, disappearing entirely at £125,140.

Income tax is then calculated on your taxable income (gross salary minus personal allowance) using the appropriate tax bands for your region. England, Wales, and Northern Ireland share the same income tax rates, while Scotland has its own set of bands with different rates and thresholds.

National Insurance contributions are calculated separately. Employee NI for 2025/26 is charged at 8% on earnings between £12,570 and £50,270, and at 2% on earnings above £50,270. Unlike income tax, National Insurance does not have a personal allowance taper for high earners.

Student loan repayments, if applicable, are calculated as a percentage of income above the relevant plan threshold. These are deducted alongside tax and NI. Finally, any pension contributions not made through salary sacrifice are deducted from your net pay. The remaining amount is your take home pay.

Income Tax Rates and Bands for 2025/26

Income tax in England, Wales, and Northern Ireland is calculated using three main bands. The rates and thresholds for the 2025/26 tax year are as follows:

Welsh taxpayers pay the same rates as England for 2025/26, although the Welsh Parliament (Senedd) has the power to set Welsh rates of income tax and could vary them in future tax years. Scottish taxpayers have a different set of rates and bands, which are detailed in a separate section below.

It is important to note that these rates apply only to non-savings, non-dividend income. Savings income and dividend income have their own rates and allowances. For employment income from a salary, the rates above are the ones that apply.

National Insurance Rates 2025/26

National Insurance contributions (NICs) are a separate deduction from income tax and fund state benefits including the State Pension, certain unemployment benefits, and statutory sick pay. For employed workers in the 2025/26 tax year, the rates are:

The Primary Threshold (PT) for 2025/26 is aligned with the personal allowance at £12,570 per year (£1,048 per month or £242 per week). This alignment, introduced in July 2022, means that both income tax and National Insurance begin at the same earnings level, simplifying the calculation for most employees.

The Upper Earnings Limit (UEL) is £50,270 per year, which is the same as the higher rate tax threshold. Above this level, the NI rate drops from 8% to 2%. Combined with the 40% higher rate of income tax, this gives a combined marginal rate of 42% for higher rate taxpayers.

Employers also pay NI on their employees' earnings. From April 2025, the employer NI threshold was reduced to £5,000 per year (down from £9,100), and the rate is 15% above this threshold. This represents a significant increase in employment costs for businesses.

What Changed in April 2025

Several important changes took effect from April 2025 that impact take home pay calculations:

• Employer NI threshold reduction: The secondary threshold for employer National Insurance was reduced from £9,100 to £5,000 per year. While this does not directly reduce employee take home pay, it significantly increases the cost of employment and may influence salary offers and pay rises.
• Employer NI rate increase: The employer NI rate increased from 13.8% to 15%, further raising employment costs for businesses across the UK.
• Frozen personal allowance: The personal allowance remains frozen at £12,570, as it has been since 2021/22. With wages rising due to inflation, this fiscal drag means more taxpayers are being pulled into higher tax bands. The freeze is expected to continue until at least 2028/29.
• Frozen tax thresholds: The basic rate threshold (£37,700) and higher rate threshold (£50,270) also remain frozen, continuing the pattern of fiscal drag that effectively increases the tax burden as wages rise.
• National Living Wage increase: The National Living Wage for workers aged 21 and over increased to £12.21 per hour, up from £11.44, giving full-time workers on the minimum wage a higher gross salary.

Worked Examples

Example 1: Basic Rate Taxpayer on £25,000

Consider an employee earning £25,000 per year in England with no student loans and no pension contributions:

• Gross salary: £25,000 per year
• Personal allowance: £12,570
• Taxable income: £25,000 - £12,570 = £12,430
• Income tax: £12,430 at 20% = £2,486.00
• National Insurance: (£25,000 - £12,570) at 8% = £994.40
• Total deductions: £2,486.00 + £994.40 = £3,480.40
• Annual take home pay: £25,000 - £3,480.40 = £21,519.60
• Monthly take home pay: £1,793.30

This gives an effective tax rate of 13.92%. For every pound earned, this employee keeps approximately 86p after all deductions.

Example 2: Higher Rate Taxpayer on £55,000

Consider an employee earning £55,000 per year in England with a Plan 2 student loan and 5% salary sacrifice pension:

• Gross salary: £55,000 per year
• Salary sacrifice pension: £55,000 at 5% = £2,750
• Adjusted salary for tax: £55,000 - £2,750 = £52,250
• Personal allowance: £12,570
• Taxable income: £52,250 - £12,570 = £39,680
• Income tax: £37,700 at 20% = £7,540.00, plus £1,980 at 40% = £792.00. Total: £8,332.00
• National Insurance: (£50,270 - £12,570) at 8% = £3,016.00, plus (£52,250 - £50,270) at 2% = £39.60. Total: £3,055.60
• Student loan (Plan 2): (£52,250 - £27,295) at 9% = £2,245.95
• Total deductions: £8,332.00 + £3,055.60 + £2,245.95 + £2,750.00 = £16,383.55
• Annual take home pay: £55,000 - £16,383.55 = £38,616.45
• Monthly take home pay: £3,218.04

The salary sacrifice pension saves this employee both income tax and NI on the £2,750 contribution. Without salary sacrifice, a net pay pension would only save income tax, not National Insurance.

Example 3: £110,000 Salary with Personal Allowance Taper

Consider an employee earning £110,000 per year in England with no student loans and no pension:

• Gross salary: £110,000 per year
• Personal allowance reduction: Income exceeds £100,000 by £10,000, so personal allowance is reduced by £10,000 / 2 = £5,000. Adjusted personal allowance: £12,570 - £5,000 = £7,570
• Taxable income: £110,000 - £7,570 = £102,430
• Income tax: £37,700 at 20% = £7,540.00, plus £64,730 at 40% = £25,892.00. Total: £33,432.00
• National Insurance: (£50,270 - £12,570) at 8% = £3,016.00, plus (£110,000 - £50,270) at 2% = £1,194.60. Total: £4,210.60
• Total deductions: £33,432.00 + £4,210.60 = £37,642.60
• Annual take home pay: £110,000 - £37,642.60 = £72,357.40
• Monthly take home pay: £6,029.78

The personal allowance taper means that the effective marginal tax rate on income between £100,000 and £125,140 is 60% (40% income tax plus an additional 20% from losing £1 of allowance for every £2 earned). Combined with 2% NI, the combined marginal rate is 62%. This is one of the highest marginal tax rates in the UK system and is a key reason why pension contributions are particularly tax-efficient for earners in this bracket.

Scottish Income Tax Bands 2025/26

Scotland has the power to set its own income tax rates on non-savings, non-dividend income. The Scottish Parliament has introduced a six-band system with rates that differ significantly from the rest of the UK:

The Scottish starter rate of 19% means that earners below £14,876 pay slightly less income tax than their English counterparts. However, the higher rates of 42%, 45%, and 48% mean that earners above £43,662 pay more. The crossover point where Scottish taxpayers begin paying more overall is approximately £28,850.

It is important to note that National Insurance rates are the same across the entire UK. Only income tax is devolved to Scotland. Savings and dividend income are also taxed at UK-wide rates, regardless of where you live in Scotland.

Student Loan Repayment Thresholds

Student loan repayments are deducted from your salary once you earn above the repayment threshold for your plan type. The thresholds for 2025/26 are:

Repayments are calculated on income above the threshold. For example, a Plan 2 borrower earning £35,000 per year would repay 9% of (£35,000 - £27,295) = £693.45 per year, or £57.79 per month. If you have multiple student loan plans, repayments are calculated and deducted separately for each plan.

Student loan repayments do not affect your income tax calculation. They are a separate deduction taken from your gross pay after tax and NI have been calculated. Unlike tax, student loan repayments only apply to employment income above the threshold and are automatically stopped once the loan is fully repaid.

Pension Contributions and Tax Relief

How your pension contributions interact with tax depends on the type of scheme your employer operates. There are three main arrangements:

Salary Sacrifice

With salary sacrifice, you agree to reduce your contractual gross salary in exchange for employer pension contributions. Because your salary is lower, you pay less income tax and less National Insurance. Your employer also saves on employer NI. This is generally the most tax-efficient method for employees. The pension contribution does not appear as a deduction on your payslip because your salary has already been reduced.

Net Pay Arrangement

Under a net pay arrangement, your pension contribution is deducted from your gross salary before income tax is calculated, but after National Insurance. This means you get full income tax relief automatically through payroll, but you still pay NI on the full salary. Most occupational pension schemes, including the NHS pension and teachers' pension, use this method.

Relief at Source

With relief at source, your pension contribution is taken from your net (after-tax) pay. Your pension provider then claims basic rate tax relief (20%) from HMRC and adds it to your pension pot. If you are a higher rate (40%) or additional rate (45%) taxpayer, you must claim the additional relief through your tax return. Many workplace auto- enrolment schemes and all personal pensions use this method.

The key difference for take home pay is that salary sacrifice reduces both tax and NI, net pay reduces only tax, and relief at source provides tax relief partly through payroll and partly through your pension provider. Our calculator lets you model all three arrangements so you can see the impact on your take home pay.

Common Mistakes When Calculating Take Home Pay

When estimating your take home pay, there are several common errors that can lead to incorrect figures:

1. Applying the Tax Rate to Your Entire Salary

The UK uses a progressive tax system, meaning different portions of your income are taxed at different rates. If you earn £40,000, you do not pay 20% on the full amount. Instead, the first £12,570 is tax-free, and only the remaining £27,430 is taxed at 20%. This is a common misunderstanding that leads people to overestimate their tax bill significantly.

2. Confusing Gross and Net Salary

Your gross salary is the headline figure before any deductions. Your net salary (take home pay) is what lands in your bank account after tax, NI, student loans, and pension. When comparing job offers or negotiating salary, always clarify whether figures are gross or net. A £50,000 gross salary in England results in roughly £38,500 take home pay (without student loans or pension), which is very different from a £50,000 net salary.

3. Forgetting the Personal Allowance Taper

If your income exceeds £100,000, your personal allowance is gradually withdrawn. Many people earning between £100,000 and £125,140 are surprised to find their effective marginal rate is 60% (or 62% including NI). Failing to account for this taper leads to underestimating tax for six-figure earners.

4. Using Wrong Student Loan Plan

Each student loan plan has a different repayment threshold. Using the wrong plan type can cause your estimate to be off by hundreds of pounds per year. Check your Student Loans Company correspondence to confirm which plan type applies to you. If you started university in England or Wales before September 2012, you are on Plan 1. After September 2012, you are on Plan 2. Scottish students who started after 2012 are on Plan 4. Students starting from September 2023 in England are on Plan 5.

5. Ignoring the Pension Type

The type of pension arrangement significantly affects your take home pay. A 5% salary sacrifice pension provides more take home pay than a 5% relief-at-source pension because salary sacrifice saves both tax and NI, while relief at source only provides tax relief. Always check with your employer which type of scheme you are enrolled in before using a salary calculator.