How We Calculate UK Take-Home Pay

1. Deduction order

The order of deductions matters. Most calculator errors happen because the wrong sequence is applied — particularly around pension contributions and how they interact with NI. Here is the exact sequence our engine follows, which matches HMRC's employer guidance:

1. 1

   Determine gross earnings

   The starting point is annual gross salary. For hourly workers, this is calculated from the hourly rate and contracted hours. Overtime, bonuses, and benefits in kind are excluded unless explicitly entered.

2. 2

   Apply salary sacrifice pension (if applicable)

   Salary sacrifice contributions are deducted from gross salary before any tax or NI is calculated. This reduces the PAYE gross — the figure HMRC uses for all subsequent calculations. This is why salary sacrifice saves both Income Tax and NI, while relief-at-source pension only saves Income Tax.

3. 3

   Calculate Income Tax using the tax code

   The Personal Allowance is derived from the tax code (1257L = £12,570 tax-free). Taxable income = adjusted gross − Personal Allowance. Tax is applied at each band rate in order: 20% up to £37,700, 40% from £37,701 to £125,140 (minus any PA withdrawal), 45% above £125,140. For Scottish taxpayers (S prefix), six bands are applied instead.

4. 4

   Apply the Personal Allowance taper (£100k+)

   If adjusted gross exceeds £100,000, the Personal Allowance is reduced by £1 for every £2 above that threshold. At £125,140, the PA is zero. This creates the effective 60% marginal rate in the £100k–£125,140 band. Salary sacrifice pension contributions that bring adjusted income back below £100,000 restore the full Personal Allowance.

5. 5

   Calculate Employee National Insurance

   NI is calculated on adjusted gross (after salary sacrifice, same as tax). The Primary Threshold is £12,570. Earnings between £12,570 and £50,270 attract 8% employee NI. Earnings above £50,270 attract 2%. NI is calculated using the weekly or monthly earnings thresholds — this can create small differences vs. annual calculations due to period rounding.

6. 6

   Calculate pension relief at source (if applicable)

   If the pension type is Relief at Source (not salary sacrifice), the employee contribution is deducted from net pay after tax. HMRC adds Basic Rate relief (20%) to the pension provider directly. Higher-rate taxpayers must claim the additional relief via Self Assessment. This method does not save NI.

7. 7

   Calculate student loan repayment

   Student loan is calculated on gross income above the plan threshold (not the adjusted gross for tax/NI — pension contributions do not reduce the repayment base unless they are salary sacrifice). The repayment rate is 9% for Plans 1/2/4/5 and 6% for Postgraduate. Multiple active plans are calculated independently and combined.

8. 8

   Calculate High Income Child Benefit Charge (HICBC) if applicable

   HICBC is based on Adjusted Net Income (ANI), which does account for pension contributions (both salary sacrifice and relief at source). The charge applies at 1% of the annual Child Benefit amount for every £200 of ANI above £60,000, reaching 100% at £80,000. Unlike PAYE deductions, HICBC is collected via Self Assessment, not payroll — our calculator estimates it for planning purposes.

9. 9

   Calculate take-home pay

   Take-home = adjusted gross − Income Tax − Employee NI − pension (relief at source) − student loan. Salary sacrifice pension is excluded from take-home because it was subtracted at step 2 from gross; it is shown separately as a pension pot contribution.

2. Data sources for 2026/27

All rates, thresholds, and rules are extracted directly from official HMRC and UK Government publications. We do not use secondary sources, media reports, or other calculator sites. Every figure below is linked to its primary source.

3. Rounding rules

HMRC-approved payroll software applies rounding at the pay period level (weekly or monthly), which can cause the annual total to differ by a few pence from a simple annual calculation. Our calculator applies the following rules to match payroll software behaviour:

• Income Tax: annual taxable income is rounded down to the nearest pound before applying rates. Monthly figures are calculated as annual ÷ 12, rounded to the nearest penny.
• National Insurance: NI thresholds are expressed as weekly/monthly limits by HMRC. Our calculator applies the annual equivalent thresholds (dividing by 52 or 12 and rounding down) to produce the monthly NI figure, then multiplies by 12 for the annual display. This can produce a ±£0.05 difference vs. a real 12-period payroll.
• Student loan: repayment is calculated on the annual threshold, then divided by 12 for the monthly figure, rounded down.

4. How we test accuracy

The calculator is verified against two independent sources:

5. Known limitations

We deliberately document what the calculator does not calculate, to avoid giving users false confidence:

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  Benefits in Kind (BIK): Company cars, private medical insurance, and other BIK are not modelled. BIK adds to taxable income and changes National Insurance for both employee and employer — the HMRC benefit calculator is the authoritative source for these.
• ✗
  Multiple employments: If you have more than one job, tax codes split between employers in ways that vary per situation. Our calculator assumes a single employment.
• ✗
  Irregular income: Bonus payments in a single month can temporarily push you into emergency-rate NI due to the monthly threshold application. Annual figures are unaffected, but monthly payslips during bonus months will look different.
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  Self-employed income: Class 4 NI for the self-employed is calculated differently. Use our Self-Employed Calculator on the calculator page for self-employment figures.
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  Tax credits and Universal Credit: Benefits interactions are not modelled. The income used by HMRC for UC calculations differs from the take-home pay figure — see gov.uk/universal-credit for official guidance.

6. Changelog