Understanding Your UK Pay: A Guide to Taxes
When you receive a job offer, you’re quoted a “gross salary.” This is the total amount your employer agrees to pay you. However, the amount that actually lands in your bank account—your “net pay” or “take-home pay”—is lower. This is because the government, your pension provider, and (if applicable) the Student Loans Company take their share first. This guide explains what those deductions are.
1. Income Tax
Income Tax is the government’s primary way of raising money to fund public services like the NHS, education, defense, and infrastructure. The amount you pay is based on how much you earn.
- Personal Allowance: For 2025/2026, most people get a Personal Allowance of £12,570. This is the amount of income you can earn each year without paying *any* Income Tax.
- Tapering: This allowance is reduced if you earn over £100,000. It goes down by £1 for every £2 you earn above this limit, meaning it disappears completely if you earn £125,140 or more.
- Marginal Tax Bands: You only pay a specific tax rate on the portion of your income that falls *within* a certain band. You don’t pay the highest rate on your entire salary.
The tax bands differ depending on where you live in the UK.
England, Wales, and Northern Ireland (2025/2026)
| Band | Taxable Income | Tax Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic Rate | £12,571 to £50,270 | 20% |
| Higher Rate | £50,271 to £125,140 | 40% |
| Additional Rate | Over £125,140 | 45% |
Scotland (2025/2026)
Scotland has its own set of income tax bands which are more granular.
| Band | Taxable Income | Tax Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Starter Rate | £12,571 to £15,397 | 19% |
| Basic Rate | £15,398 to £27,491 | 20% |
| Intermediate Rate | £27,492 to £43,662 | 21% |
| Higher Rate | £43,663 to £75,000 | 42% |
| Advanced Rate | £75,001 to £125,140 | 45% |
| Top Rate | Over £125,140 | 48% |
2. National Insurance (NI)
National Insurance Contributions (NICs) are separate from Income Tax. They build up your entitlement to certain state benefits, most notably the State Pension, as well as Jobseeker’s Allowance and maternity/paternity pay.
As an employee, you pay Class 1 National Insurance. The rates for 2025/2026 are:
| Earnings Band | NI Rate |
|---|---|
| Up to £12,570 per year | 0% |
| £12,570.01 to £50,270 per year | 8% |
| Over £50,270 per year | 2% |
3. Other Common Deductions
Pension Contributions
Under the UK’s auto-enrolment scheme, most employees are automatically signed up to a workplace pension. A percentage of your pay is deducted and saved for your retirement. The 5% used in the calculator is a common default, but you can change it. This money is invested, and you also get tax relief on your contributions, making it a very efficient way to save.
Student Loan Repayments
If you have a student loan, repayments are automatically deducted from your pay once you earn over a certain threshold. The threshold and repayment rate depend on which “Plan” you are on.
- Plan 1: 9% on income over £26,065
- Plan 2: 9% on income over £28,470
- Plan 4 (Scottish): 9% on income over £31,395
- Plan 5 (New English): 9% on income over £25,000
- Postgraduate Loan: 6% on income over £21,000
Disclaimer: This calculator provides estimates for illustrative purposes only. It does not constitute financial advice. Your actual take-home pay may vary based on your specific tax code, pension scheme, salary sacrifice arrangements, and other personal circumstances. Always consult an official P45/P60 or a financial professional for exact figures.
