If you’ve ever looked at your payslip and thought “that doesn’t seem right”, you’re not alone. Learning to calculate take home pay properly is one of those things that sounds straightforward — subtract tax and National Insurance — but quickly gets more complicated when you factor in your tax code, pension contributions, a student loan, or any other income you’re receiving outside of PAYE.

For most UK employees in 2026/27, the core calculation hasn’t changed dramatically. The Personal Allowance remains at £12,570, and the higher rate threshold sits at £50,270. But the details — especially if your situation isn’t a simple one-job, no-complications setup — are where people get caught out.

We’ve put this post together to explain how the numbers actually work, what you should look for on your payslip, and why two people on the same salary can end up with noticeably different take-home figures.

Before anything else, it helps to understand what’s actually being taken off your salary. For most employees, there are three automatic deductions under PAYE:

• Income tax — calculated on your taxable income (gross pay minus your Personal Allowance and any allowable deductions)
• Employee National Insurance contributions — charged separately to income tax, on your earnings above the Primary Threshold
• Pension contributions — if you’re auto-enrolled in a workplace pension, your employee contribution comes out before or after tax depending on the scheme type

On top of these, some employees also have student loan repayments deducted through PAYE, and others might have salary sacrifice arrangements reducing their gross pay before deductions are applied.

The key thing to understand is that income tax and National Insurance are calculated independently of each other. They share some common reference points — both use £12,570 as a starting threshold for 2026/27 — but they have different rates and different upper limits. A lot of people assume their take-home is simply “gross minus 20%”, but that’s rarely how it works out in practice.

Income tax in the UK is tiered. You pay nothing on the first £12,570 of your income (the Personal Allowance), then 20% on earnings between £12,571 and £50,270, and 40% on anything above that up to £125,140.

These thresholds are fixed until April 2028, so there’s no change from last year to worry about.

Here’s a worked example. If you earn £35,000:

• First £12,570 — no tax (Personal Allowance)
• Next £22,430 (the remainder up to £35,000) — taxed at 20%
• That gives an income tax bill of roughly £4,486 per year, or about £374 per month

The median full-time salary in the UK was around £39,039 as of April 2025, which puts most employees firmly within the basic rate band. That means the majority of PAYE workers pay 20% income tax on most of their earnings — but it’s not 20% of their entire salary.

One thing worth flagging: your tax code on your payslip directly controls how much of your Personal Allowance is applied. If your code is lower than 1257L — for example, because HMRC is collecting tax on a side income through your PAYE — your take-home will be lower than a simple calculation would suggest.

National Insurance contributions (NICs) are where a lot of the confusion around take-home pay comes from, partly because they’re separate from income tax and partly because the rates and thresholds work differently.

For 2026/27, employee Class 1 NICs work like this:

• No NICs on earnings up to the Primary Threshold (aligned with the Personal Allowance at £12,570 per year)
• 8% NICs on earnings between £12,570 and £50,270
• 2% NICs on earnings above £50,270

Using the same £35,000 example: after removing the threshold of £12,570, you’re paying 8% on £22,430 — that’s around £1,794 per year, or approximately £150 per month.

Combined with the income tax figure above, someone earning £35,000 is paying roughly £524 per month in tax and NICs alone before pension contributions. Their gross monthly pay is around £2,917, which means their net take-home before pension deductions is approximately £2,393.

It’s worth noting that employer NICs — which increased significantly from April 2025 — are paid on top of your salary by your employer. They don’t reduce your take-home directly, but they do affect the total cost of employing you, which is worth understanding if you’re negotiating a pay rise or evaluating a new role.

Beyond the core tax and NICs calculation, several factors can quietly change what lands in your bank account each month.

Pension contributions

Under auto-enrolment, employees typically contribute a minimum of 5% of qualifying earnings. If your contributions are made under a salary sacrifice arrangement, they reduce your gross pay before tax and NICs are calculated — which actually means you pay slightly less tax and NI than you would otherwise. Net pay arrangements work differently, taking contributions from post-tax income.

Student loan repayments

If you have a student loan, repayments are collected through PAYE once your earnings pass the relevant threshold. The threshold and repayment rate depend on your loan plan type (Plan 1, Plan 2, Plan 5, or Postgraduate), and the deductions happen automatically — they’re not reflected in your tax code.

Your tax code

Your PAYE tax code is the single most common reason two employees on identical salaries have different take-home pay. HMRC adjusts codes to collect underpaid tax from previous years, account for benefits in kind, or claw back tax on non-PAYE income. If you have a second job, rental income, or any self-employed earnings, your primary employment code may be reduced to collect the extra tax — and this catches a lot of people off guard.

Online take-home pay calculators are genuinely useful as a starting point, but they carry a health warning that most don’t clearly display: they assume a standard situation.

Most calculators will give you a reasonably accurate figure if you have one employer, a standard 1257L tax code, no student loan, and a simple pension setup. As soon as any of those variables changes, the output can diverge meaningfully from your actual payslip.

The areas where we consistently see calculators fall short include salary sacrifice (where the gross figure inputted doesn’t match the taxable gross after the sacrifice is applied), non-standard tax codes, and anything involving multiple income sources. Users across various forums have flagged discrepancies in results between different calculators for exactly these reasons — and they’re right to be sceptical.

Our view: a calculator is fine for a rough sense check. But if your situation has any complexity to it — a second income, recent redundancy payment, Benefits in Kind from your employer, or questions about whether your tax code looks correct — an actual conversation with an accountant will save you more time than trying to reconcile spreadsheet outputs.

We help clients understand their payslips and tax positions regularly. Sometimes it’s a quick reassurance that everything looks right. Sometimes it reveals an error in a PAYE code that’s been quietly costing someone money for months.