Take home pay is one of those concepts that feels straightforward right up until you look at your first payslip — or run your numbers through a government calculator and get a figure that bears little resemblance to what lands in your bank account. We hear this from clients regularly, whether they’re employed, self-employed, or drawing income from their own limited company.

The reality is that several deductions work simultaneously, some of which change year to year, and the interaction between them can be genuinely confusing. In 2026/27 there are also some meaningful changes — particularly for director-shareholders — that affect how much people are actually keeping.

This post sets out the main moving parts clearly, so you can understand your own position rather than just accepting the figure on the slip.

Your gross salary is the starting point. What you actually receive after deductions is your net, or take home, pay. The main deductions for most employees in 2026/27 are income tax, National Insurance contributions (NICs), and — where applicable — pension contributions.

Income tax

For the 2026/27 tax year (6 April 2026 to 5 April 2027), the standard Personal Allowance remains at £12,570. This is the amount you can earn before income tax applies at all. Above that threshold, the rates are:

• Basic rate (20%) — on income between £12,571 and £50,270
• Higher rate (40%) — on income between £50,271 and £125,140
• Additional rate (45%) — on income above £125,140

One thing worth noting: if your adjusted net income exceeds £100,000, your Personal Allowance is reduced by £1 for every £2 above that level. By £125,140 the allowance has gone entirely — which creates an effective 60% marginal rate for income in that band.

National Insurance

Employees pay Class 1 NICs on earnings above the Primary Threshold. Employer NICs are a separate cost your employer bears. Together these mean the full cost of employing you is higher than your gross salary, but from your perspective it is your employee NIC rate that hits your take home directly.

Pension contributions

If you are auto-enrolled into a workplace pension, a percentage of your qualifying earnings is deducted before it reaches your account. The method matters — relief at source, net pay arrangement, and salary sacrifice all work differently and can explain why some people find their actual take home differs from calculator estimates.

We regularly hear from people who run their salary through an online take home pay calculator, then find the figure on their payslip is notably lower — sometimes by £50 to £100 or more per month. There are a few common reasons for this.

The calculator assumed a standard tax code

Most calculators default to the 1257L tax code, which reflects the full £12,570 Personal Allowance spread evenly across the year. If your actual tax code is different — perhaps because you have multiple income sources, an underpayment being collected, or a taxable benefit in kind — your deductions will be higher than the calculator suggests.

Pension method assumptions

The way your pension contributions are handled affects your taxable pay. Under salary sacrifice, your gross pay for tax and NIC purposes is reduced, so you pay less tax overall and your take home is often higher than a standard calculator assumes. Under a relief-at-source or net pay arrangement, the mechanics work differently. If the calculator does not ask you which method applies, its output will only be approximate.

Student loan repayments

Student loan deductions operate independently of tax and NIC but reduce take home pay meaningfully. Depending on your plan type, repayments kick in at different income thresholds and at a percentage of earnings above those thresholds. Many calculators offer this as a tick-box rather than a detailed input, and default settings can lead to over- or under-estimates.

The clearest thing you can do if your take home does not match expectations is to look line by line at your payslip and check what code HMRC is using.

Your tax code tells your employer how much of your income to treat as tax-free each pay period. For most people it is 1257L, but HMRC issues revised codes when your circumstances change — and not everyone notices until the deduction has already gone through.

Common triggers for a tax code change include:

• Starting a new job, particularly if your new employer does not have your P45
• Taking on a second job or a second pension (these typically attract a BR or D0 code rather than the full allowance)
• Receiving taxable state benefits such as the State Pension
• Savings interest exceeding your Personal Savings Allowance
• Claiming Marriage Allowance or workplace expense relief

If HMRC does not have your correct details, you may be placed on an emergency tax code temporarily, which often results in over-deduction. In most cases this is corrected through the PAYE system over the course of the year, but it can take time and can be disorienting if you are not expecting it.

The practical advice here is simple: check your tax code on your payslip and cross-reference it with your HMRC Personal Tax Account. If something looks wrong, it is worth querying it early rather than waiting for the year-end to sort itself out. Underpayments are often collected via a reduced tax code in the following year, which reduces your take home again until the debt is cleared.

If you run your own limited company and take income as a combination of salary and dividends — a common and tax-efficient approach — April 2026 brought changes that are worth factoring into your take home expectations.

Dividend tax rates increased from April 2026. The basic rate on dividends rose from 8.75% to 10.75%, and the higher rate rose from 33.75% to 35.75%. The additional rate remains at 39.35%. The dividend allowance — the amount you can receive in dividends before paying tax — remains at £500.

In practical terms, for a director taking a salary of £12,570 and dividends of £37,700 (remaining within the basic rate band), the April 2026 increase means roughly £744 more in dividend tax per year compared with last year. That is approximately £62 less per month in take home pay from the same income mix — before any other changes.

Income tax and National Insurance thresholds remain frozen until 2031. With average earnings continuing to rise — ONS data shows regular pay growing around 3.4% year on year as of early 2026 — more people are being pulled into higher tax bands without any change to the headline rates. This is sometimes called fiscal drag, and it quietly erodes take home pay for employees and directors alike.

If you have not revisited your salary and dividend split since before April 2026, it is worth doing so. The optimal combination may have shifted slightly given the new rates.