How your take-home pay is worked out
Four things normally come out of an employee's pay: income tax, National Insurance, student loan repayments and pension contributions. Each has its own threshold and its own rules about which pay it is charged on, which is why a pay rise or a change to how you save for retirement can move your take-home pay by more or less than you expect. The calculator applies the 2026/27 rates, which run from 6 April 2026 to 5 April 2027.
Income tax bands for 2026/27
Most people get a tax-free personal allowance of £12,570. It falls by £1 for every £2 of adjusted net income above £100,000, so it disappears completely at £125,140. In England, Wales and Northern Ireland the bands on taxable income above the allowance are:
| Band | Income (standard allowance) | Rate |
|---|---|---|
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
Scottish taxpayers pay different rates on earnings: 19% starter rate up to £16,537, 20% to £29,526, 21% to £43,662, 42% to £75,000, 45% to £125,140 and 48% above. You are a Scottish taxpayer if you live in Scotland, and your tax code will start with an S.
National Insurance and student loans
Employees pay Class 1 National Insurance at 8% on earnings between £12,570 and £50,270 a year and 2% above that. Student loans are repaid at 9% of pay above your plan's threshold (Plan 1 £26,900, Plan 2 £29,385, Plan 4 £33,795, Plan 5 £25,000) and Postgraduate Loans at 6% above £21,000. If you have more than one undergraduate plan you repay once, against the lowest threshold; a Postgraduate Loan is repaid on top. Both National Insurance and student loans are charged on the same pay figure, which matters when you choose how to pay into a pension.
How pension contributions change the result
The same 5% contribution can leave you with different take-home pay depending on how your employer's scheme collects it:
- Relief at source. You pay 80% of the contribution from your taxed pay and the provider claims the other 20% from HMRC. Higher and additional rate taxpayers, and Scottish taxpayers paying 21% or more, claim the extra relief through Self Assessment or their tax code; the calculator includes it and tells you how much you need to claim;
- Net pay arrangement. Your employer takes the contribution before calculating income tax, so relief is immediate. National Insurance and student loan repayments are still worked out on your full salary;
- Salary sacrifice. You give up part of your salary and your employer pays it into the pension instead. Because your cash pay is lower, you save income tax, National Insurance and student loan repayments.
For basic-rate taxpayers, relief at source and net pay give the same result. Salary sacrifice is usually better for take-home pay, but your contractual salary is lower, which can matter for anything worked out from it, such as mortgage affordability or earnings-related statutory pay. It also cannot take your pay below the National Minimum Wage.
Worked example
Take a salary of £35,000 in England, a 5% pension under relief at source and a Plan 2 student loan:
| Year | Month | |
|---|---|---|
| Gross pay | £35,000.00 | £2,916.67 |
| Income tax: 20% of £22,430 | £4,486.00 | £373.83 |
| National Insurance: 8% of £22,430 | £1,794.40 | £149.53 |
| Plan 2: 9% of £5,615 | £505.35 | £42.11 |
| Pension: 80% of £1,750 | £1,400.00 | £116.67 |
| Take-home pay | £26,814.25 | £2,234.52 |
£1,750 reaches the pension, of which £350 is tax relief added by the provider. Switch the same 5% to salary sacrifice and take-home pay rises to £27,111.75, because the £1,750 is no longer charged to National Insurance or the student loan.
The 60% band between £100,000 and £125,140
Between £100,000 and £125,140 every extra £2 of income removes £1 of personal allowance, so a £1 pay rise is taxed at 40% and also brings 50p of previously tax-free income into the 40% band. The effective rate is 60% in England, Wales and Northern Ireland, plus 2% National Insurance. Pension contributions reduce adjusted net income, so paying more into a pension can restore some or all of the allowance.
What this calculator does not cover
- Non-standard tax codes. Benefits in kind, underpayments from earlier years and the marriage allowance all change your code;
- Other income. Savings interest, dividends, rental profit and self-employment are taxed alongside your salary but are not included;
- Payroll timing. Tax and National Insurance are worked out each payday, so a bonus month or a mid-year start will not match an annual estimate;
- The High Income Child Benefit Charge. It applies if you or your partner have income over £60,000 and claim Child Benefit;
- Employees over State Pension age. They pay no employee National Insurance.
Getting it right
If your payslip does not match this estimate, the first thing to check is your tax code. Our personal tax return service can review your code and claim any higher-rate pension relief you are owed, and our tax planning team can help if your income is close to the £100,000 threshold. For National Insurance on its own, use our National Insurance calculator.