How UK Take-Home Pay Is Calculated in 2025/26

Gross pay and taxable pay are not always the same

Most people start with one number: annual salary. But the figure HMRC taxes can be lower if you have pension salary sacrifice, and higher if you receive taxable benefits. The key point is that your contract salary and your taxable income can diverge.

In a standard PAYE setup, your employer applies tax code allowances first, then calculates income tax across each relevant band. National Insurance is then calculated separately, with different thresholds and rates. This is why your payslip has multiple deduction lines rather than one combined tax.

When people ask why their net pay moved even though salary did not, the answer is usually in one of three places: tax code changes, pension contribution changes, or crossing a threshold where a higher marginal rate applies.

• Gross salary is your headline pay.
• Taxable pay is what tax is applied to after adjustments.
• NI uses its own threshold logic and does not mirror income tax exactly.

The four deductions that matter most

For most employees, net pay is driven by four core deductions. Income tax is progressive by band. National Insurance applies after its threshold. Student loan depends on your repayment plan. Pension contributions depend on contribution rate and whether they are salary sacrifice.

If you want a realistic estimate, you should always set student loan plan and pension rate explicitly. Leaving these at zero can make results look better than your actual payslip.

The practical benefit of a proper calculator is that it lets you test scenarios quickly: what happens if pension rises from 3% to 6%, or if salary moves from GBP 49,000 to GBP 52,000.

• Income tax: progressive and tax-code sensitive.
• NI: separate thresholds and rates.
• Student loan: plan-specific thresholds.
• Pension: percentage based and highly impactful.