If you want to calculate take home pay, you need more than just a salary figure. You need to know your tax code, your National Insurance category, whether you’re contributing to a pension, and whether you have a student loan. Miss any one of those and the number you get will be wrong — sometimes by a meaningful amount.

In our experience, the confusion usually surfaces when someone starts a new job, gets a payrise, or moves from employment into running their own business. Suddenly the gap between gross and net feels larger than expected, and the instinct is to assume an error on the payslip. Often it isn’t an error — it’s just that the full picture wasn’t factored in.

This post lays out the mechanics plainly, so you can understand what’s happening to your pay before it reaches your account.

For most employees in the UK, there are up to four deductions that reduce your gross pay to your net (take home) pay:

• Income Tax — based on your taxable income above the Personal Allowance, applied at the relevant rate band.
• Employee National Insurance (NI) — a separate levy on earnings, calculated independently of Income Tax.
• Pension contributions — if you’re enrolled in a workplace pension, your employee contribution comes out before or after tax depending on the scheme type.
• Student loan repayments — deducted at source via payroll once your earnings cross the relevant threshold for your repayment plan.

Of these, Income Tax and NI are the two that catch people most off guard. They’re separate calculations, not combined, and they each have their own thresholds. A common misconception is that once you hit the higher rate tax band, everything you earn is taxed at 40%. It isn’t — only the earnings above the threshold are taxed at that rate. The rest stays at 20%.

Any voluntary deductions — such as a company car scheme, cycle to work, or other salary sacrifice arrangements — will also reduce your taxable pay, which in turn reduces your Income Tax and NI liability. That’s worth understanding if you’re comparing a benefits package between employers.

The Personal Allowance — the amount you can earn before paying any Income Tax — remains frozen at £12,570 for 2026/27. It has been frozen since 2021/22, which means that as wages have risen (ONS data shows average total pay growing at around 4.1% year-on-year in early 2026), more people are being pulled into higher rate tax without any formal rate rise. This is fiscal drag in practice.

Above that threshold, the rates for England, Wales, and Northern Ireland are:

• Basic rate (20%): £12,571 to £50,270
• Higher rate (40%): £50,271 to £125,140
• Additional rate (45%): above £125,140

For employee National Insurance in 2026/27:

• 8% on weekly earnings between £242 and £967 (roughly £12,570 to £50,270 annually)
• 2% on earnings above £967 per week

If you earn £35,000 a year, for example, your Income Tax bill is roughly £4,486 and your employee NI is around £1,794 — a combined deduction of about £6,280 before any pension or student loan comes out. Your take home pay from a £35,000 salary would therefore be in the region of £28,700, assuming a standard 1257L tax code and no other deductions.

If you’re based in Scotland, different Income Tax rates and bands apply — the structure is notably different above the basic rate. We’ve written more on that separately for take home pay in Scotland.

This is one of the most common points of frustration we hear. Someone runs their salary through an online calculator, gets one figure, then opens their payslip and finds something different. A few reasons this happens:

Your tax code isn’t the standard one

The HMRC default is 1257L, which reflects the standard Personal Allowance. But if you have taxable benefits (like a company car or private medical insurance provided by your employer), an underpayment from a previous year, or income from another source, your code will be adjusted. A different code means a different Income Tax calculation — and online tools often assume 1257L unless you specify otherwise.

Your pension scheme is salary sacrifice

If your employer uses a salary sacrifice pension arrangement, your contributions reduce your gross pay before Tax and NI are calculated. This is more tax-efficient than a standard relief-at-source pension, but it also means your taxable pay — and therefore your deductions — look different to what a basic calculator would suggest.

You have a student loan

Student loan repayments are deducted via payroll but aren’t part of the Tax or NI calculation. Calculators that don’t prompt you for loan plan type will miss this entirely. For Plan 2 (most graduates from 2012 onwards), repayments are 9% on earnings above £27,295.

If your payslip genuinely doesn’t look right even after accounting for all of the above, it’s worth checking your tax code with HMRC directly via the GOV.UK income tax checker. Incorrect tax codes are one of the most common payroll errors and they can persist for years if not spotted.

If you run your own limited company, the question of take home pay works differently. Most owner-directors structure their income as a combination of a low salary and dividends — and the two are taxed in completely different ways.

The salary is subject to Income Tax and National Insurance (both employee and employer) in the normal way. Most directors set this at or around the National Insurance secondary threshold (£9,100 in 2026/27) or the primary threshold (£12,570) — the right level depends on whether you want to preserve your NI record without triggering unnecessary employer NI costs.

Dividends sit outside the NI system entirely and are taxed at lower rates: 8.75% within the basic rate band, 33.75% in the higher rate band, and 39.35% for additional rate taxpayers. There’s a dividend allowance that lets you receive a small amount of dividend income tax-free each year — though that allowance has been reduced significantly in recent years. We cover the current position in more detail on our dividend allowance page.

The upshot is that to calculate take home pay as a director, you need to model both income streams together, accounting for Corporation Tax already paid on the company profits before dividends are distributed. It’s more involved than a standard payroll calculation — but done correctly, it’s often considerably more tax-efficient than taking the same income entirely as salary. If you’re unsure how to structure this, it’s exactly the kind of question we work through with clients regularly.