UK take-home pay explained: tax, NI and what you keep (2026/27)

You're offered a £35,000 salary, but the money that lands in your bank account is noticeably less. That gap is the difference between gross pay (the headline figure on your contract) and net pay — your take-home, after Income Tax and National Insurance have been deducted through PAYE. Here's exactly how that calculation works for the 2026/27 tax year, and what quietly changes the number.

Gross vs net: where your salary goes

Every payday your employer runs your gross pay through PAYE (Pay As You Earn) and sends two deductions straight to HMRC before you ever see the money: Income Tax and National Insurance. Pension contributions, student loan repayments and a few other items can come off too. What's left is your take-home pay.

The single most important thing to understand is that the tax bands are marginal. You don't pay 40% on your whole salary the moment you cross into the higher-rate band — only the slice of income above each threshold is taxed at the higher rate.

Income Tax bands for 2026/27

For England, Wales and Northern Ireland, the bands are:

• Personal Allowance — 0%: the first £12,570 you earn is tax-free.
• Basic rate — 20%: on income from £12,571 to £50,270.
• Higher rate — 40%: on income from £50,271 to £125,140.
• Additional rate — 45%: on income above £125,140.

These thresholds are frozen until at least April 2028, which means pay rises gradually pull more people into higher bands — an effect known as "fiscal drag." Scotland sets its own income tax bands with more rates, so Scottish taxpayers will see different figures.

National Insurance for 2026/27

National Insurance is a second, separate deduction — easy to forget because it isn't called "tax," but it lands in the same place. For employees (Class 1) in 2026/27:

• 8% on earnings between £12,570 and £50,270 a year.
• 2% on everything above £50,270.

Unlike Income Tax, NI is normally worked out on each pay period rather than cumulatively across the year, so a one-off bonus can be hit harder in the month you receive it.

A worked example: £35,000 salary

So on a £35,000 salary you keep roughly 82% of your gross pay. That proportion falls as you earn more and a larger slice is taxed at 40%.

What else changes your take-home

Pension contributions. Money paid into a workplace pension usually comes out of your pay before Income Tax, so it lowers your taxable income — you keep more of each pound by saving it rather than being taxed on it.

Student loan repayments. If you're repaying a student loan, 9% of everything you earn above your plan's threshold is deducted too (for example, roughly £29,385 on Plan 2 or £25,000 on Plan 5 for 2026/27). Postgraduate loans add a further 6%.

Your tax code. The code on your payslip (commonly 1257L) tells your employer how much tax-free allowance to apply. A wrong code is the most common reason take-home pay looks off — worth checking if your numbers don't add up.

The £100,000 trap. Above £100,000 your personal allowance is withdrawn by £1 for every £2 you earn, disappearing entirely at £125,140. In that band your effective marginal tax rate is around 60% — one of the quirks of the UK system most people never hear about.

Common misunderstandings

"I got a pay rise into the 40% band, so I'm worse off." Almost never true — only the income above the threshold is taxed at 40%, so a raise still leaves more in your pocket.

"NI is the same as tax." They're calculated separately, with different thresholds and rules, even though both reduce your take-home.

"My bonus was taxed at 50%." It can look that way on the payslip because PAYE and NI are applied in the month it's paid, but it usually evens out across the year.