Take-Home Pay Calculator

How your gross salary becomes take-home

Think of your gross salary as water poured into the top of a funnel. Before a single pound reaches you, three things are skimmed off: Income Tax, National Insurance, and, if you have one, a student-loan repayment. What survives the drop is your take-home pay. On a £50,000 salary the arithmetic is surprisingly gentle: £7,486 goes to Income Tax, £2,994 to National Insurance, and £39,520 stays with you. That is a keep-rate of just under 79 pence in every pound.

The order matters more than it looks. Tax and National Insurance are each worked out on your salary independently, so they stack rather than compound. And crucially, anything you sacrifice into a pension is removed before either of them is calculated, which is the single most powerful lever on this whole page. We come back to that in section six.

Why your tax isn't one flat rate

The most common misunderstanding about Income Tax is that earning more can leave you worse off. It cannot, and the reason is that tax is charged in slices, not on your whole salary at once. Your income is stacked up a ladder of bands, and each slice is taxed only at the rate for the band it falls in. Your first £12,570 — the Personal Allowance — is completely tax-free. The slice from there to £50,270 is taxed at 20%. The slice above that up to £125,140 is taxed at 40%, and anything beyond is taxed at 45%.

A £50,000 earner never pays 40% on anything. Their income sits entirely inside the 0% and 20% bands, so a pay rise is taxed at 20p in the pound, not more. Only the pound that crosses £50,270is touched by the higher rate, and even then only that pound. This is why the “marginal rate” — the rate on your next pound — is the number that actually governs decisions like overtime, a bonus, or a pension top-up.

National Insurance, the deduction nobody mentions

National Insurance is Income Tax’s quieter twin. It uses almost the same thresholds but different rates, and it runs in the opposite direction at the top: where Income Tax rises as you earn more, National Insurance falls. You pay nothing on the first £12,570, then 8% on earnings up to £50,270, and only 2% on everything above that. That drop at £50,270 partly softens the jump to the 40% Income Tax band that happens at the very same point.

Add the two together and you get the real deduction on each slice of salary: 0% below the allowance, 28% through the basic band, then 42% in the higher band. Notice that the combined rate barely changes as you cross £50,270 — 28% becomes 42%, a 14-point jump, not the 20-point jump the headline 20%-to-40% leap suggests. The NI drop absorbs some of the shock.

Effective rate vs marginal rate

People talk about “my tax rate” as if there is one. There are two, and confusing them leads to bad decisions. Your effective rate is the average — total deductions divided by total pay. Your marginal rate is what the taxman takes from your very next pound. On £50,000, your effective rate is about 21%, because most of your income enjoyed the 0% and 20% bands. But your marginal rate is 42%, because the next pound you earn lands in the higher band.

The marginal rate is the one that answers real questions. “Is this overtime worth it?” “Should I put the bonus in my pension?” “What does a £3,000rise actually add?” All of those are decided by the marginal rate, not the average. And in one strange corner of the system, the marginal rate does something no band chart would lead you to expect.

The 60% zone between £100k and £125,140

Here is the oddest rule in UK tax, and the one this calculator is proudest of surfacing. Once your income passes £100,000, your £12,570 Personal Allowance is taken away at a rate of £1 for every £2 you earn above the line. That clawback is invisible on your payslip, but it means each extra pound in this band is taxed at 40% and drags a further 50p of previously tax-free allowance into the 40% band. The result is an effective 60% marginal rate on Income Tax alone, 62% once National Insurance is added, stretching all the way to £125,140where the allowance is finally gone.

Look at the spike. Between £100,000 and £125,140 the line jumps above the 45% additional-rate zone that follows it — a rare case where earning a little more is taxed harder than earning a lot more. Someone on£110,000 keeps just 38p of their next pound. The good news is that this trap is entirely avoidable, and the tool to escape it is the same one that quietly beats it everywhere else on the ladder.

Pension sacrifice, the closest thing to free money

A salary-sacrifice pension lowers your contractual pay before Income Tax and National Insurance are worked out. Because the money never counts as taxable income, every pound you divert into your pension costs you less than a pound of take-home. For a basic-rate taxpayer, £100 in the pension costs £72 of take-home. For a higher-rate taxpayer it costs just £58, because they dodge 40% tax and 2% NI. And for someone caught in the 60% trap, £100 of pension can cost as little as £40.

This is why pension sacrifice is the escape hatch from the 60% trap: contribute enough to bring your income back under £100,000 and you reclaim your entire Personal Allowance, turning that punishing 60p on the pound into roughly 40p of pension for every 60p you would otherwise have handed over. It also lowers the income used to assess student-loan repayments, so the benefit can stack even further.

Student loans behave nothing like a loan

A UK student loan is repaid like a tax, not a debt. You pay a fixed percentage of everything you earn above a threshold, the balance is written off after a set number of years, and the monthly amount depends only on your income — never on how much you borrowed. Most graduates from 2012 to 2023 are on Plan 2, which takes 9% of income above £28,470. Earn £35,000 and you repay 9% of the £6,530 slice above the threshold: about £588 a year, or £49 a month.

Because it is charged only on the slice above the threshold, a modest salary triggers a tiny repayment, and someone earning below the threshold pays nothing at all. It also means the “interest rate” on the loan is largely irrelevant for most people, since repayment is driven by salary and the remaining balance is eventually cancelled. Treat it as a temporary 9% graduate tax on higher earnings, not as a mortgage to be cleared as fast as possible.

Why a bonus feels so much smaller than it looks

A bonus is taxed like ordinary salary, but because it lands on top of your existing pay, it is taxed at your highest bands first. Imagine a £48,000 salary with a £5,000 bonus. The first £2,270 of that bonus fills the rest of your basic-rate band and is taxed at 28% (20% tax + 8% NI). The remaining £2,730 spills over £50,270 into the higher band and is taxed at 42%. A single bonus can therefore be taxed at two rates at once.

That is before the payslip illusion: PAYE often over-taxes a bonus in the month it is paid, assuming that inflated pay will continue all year, then corrects itself over the following months. The cash eventually settles at the figures above, but the first payslip can look alarming. If a bonus tips you near £50,270 or £100,000, a pension contribution is the cleanest way to keep more of it.

The words on your payslip, decoded