A plain-English guide to PAYE deductions and how gross salary becomes net monthly pay in the UK.
Use this guide to understand the exact path from gross salary to net monthly pay under PAYE. It is most useful when your payslip and online estimates do not match.
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.
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.
PAYE applies income tax based on your tax code and tax bands, then employee National Insurance is calculated using separate NI thresholds. Student loan and pension deductions are then applied according to your selected plan and contribution setup. This order matters because each deduction has its own threshold and rate rules. When reconciling a payslip, compare each line item against the matching annual estimate instead of trying to infer everything from a single net figure.
Net pay can differ because of tax code differences, student loan plan type, pension contribution rate, salary sacrifice, and payroll timing. Two employees on the same headline salary may have materially different deductions if one has Plan 2 repayments and 5% pension while the other has no loan and no pension. The most reliable approach is to model your own setup directly, then compare that scenario to your current payslip settings.
Not always in real payroll. Calculators typically annualise first and then show monthly equivalents, while payroll systems process period-specific earnings and cumulative tax positions. That means small differences can appear in specific months, especially around bonus periods or tax code changes. Use annual estimates for planning and month-by-month payslips for reconciliation.
Yes. Use the scenario links in this guide to open prefilled states, then adjust salary, region, loan and pension settings.
Yes. Core content is rendered in HTML and linked to salary/city/tool pages for crawlable internal navigation.
Tax region, tax code, student loan plan, pension contribution and salary sacrifice are the key assumptions to check first.