Take Home Calculator

Your take-home pay is calculated by starting with your gross salary and systematically applying various deductions mandated by HMRC (HM Revenue and Customs). This process involves multiple steps, each with specific rules and thresholds that can significantly impact your final net income.

Step 1: Personal Allowance Application

The first step in calculating your take-home pay involves applying your personal allowance. For the 2025-26 tax year, the standard personal allowance is £12,570. This means you pay no income tax on the first £12,570 of your annual earnings. However, this allowance is reduced by £1 for every £2 earned above £100,000, completely disappearing at £125,140.

Step 2: Income Tax Calculation

After your personal allowance, income tax is calculated using progressive tax bands. In England, Wales, and Northern Ireland, you pay 20% basic rate tax on earnings between £12,571 and £50,270, 40% higher rate tax on earnings between £50,271 and £125,140, and 45% additional rate tax on any earnings above £125,140. Scotland has additional tax bands with slightly different rates, providing more granular taxation but generally resulting in higher overall tax liability.

Step 3: National Insurance Contributions

National Insurance is calculated separately from income tax and follows its own thresholds. For 2025-26, you pay 12% on earnings between £12,570 and £50,270, and 2% on earnings above £50,270. Unlike income tax, National Insurance has no personal allowance reduction for high earners, making it a significant consideration for salary planning.

Step 4: Pension Contributions

Pension contributions can be made through three main methods, each with different tax implications. Auto-enrolment pensions are deducted from your net pay, meaning you pay tax and National Insurance first, then contribute to your pension. Salary sacrifice schemes allow you to contribute before tax and National Insurance, significantly reducing your tax liability. Personal and SIPP contributions are made from net pay but qualify for tax relief, effectively reducing your tax bill.

Step 5: Student Loan Repayments

Student loan repayments are calculated based on your income above specific thresholds, which vary by plan type. Plan 1 (pre-2012 students) requires 9% repayments on income above £24,990, while Plan 2 (2012-2023 students) uses a threshold of £27,295. Plan 4 applies to Scottish students with a £31,395 threshold, and Plan 5 (post-2023 students) has a £25,000 threshold. Postgraduate loan repayments are 6% on income above £21,000 and can run alongside undergraduate repayments.