How your take-home pay is worked out
Your gross salary goes through four deductions before it reaches your bank account:
- Income tax. You get a tax-free Personal Allowance of £12,570. In England, Wales and Northern Ireland the next £37,700 is taxed at 20%, income up to £125,140 at 40% and anything above that at 45%. Scotland has six bands, from 19% to 48%.
- National Insurance. Employees pay 8% on earnings between £12,570 and £50,270, and 2% on everything above. NI rates are the same across the UK.
- Pension. Workplace pensions are usually taken before tax (salary sacrifice or net pay) so they cost you less than they look. Salary sacrifice also saves National Insurance.
- Student loan. You repay 9% of earnings above your plan's threshold, plus 6% above £21,000 if you have a Postgraduate Loan.
The 60% tax trap between £100,000 and £125,140
Once your adjusted net income passes £100,000, you lose £1 of Personal Allowance for every £2 you earn. That makes the effective tax rate on this slice of income 60% (62% including NI). Paying more into your pension through salary sacrifice is the most common way to bring your income back below £100,000. Try it in the calculator above.
2026/27 income tax bands
| Band (rUK) | Taxable income | 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% |
The additional rate applies to income above £125,140, by which point the Personal Allowance has been fully withdrawn. Source: HMRC rates and thresholds 2026/27.