UK Salary Calculator

How UK PAYE Income Tax Works

PAYE (Pay As You Earn) is the system HMRC uses to collect income tax and National Insurance directly from your salary before you're paid, rather than through an annual tax return. Every employee gets a Personal Allowance — £12,570 for 2026/27 — the amount you can earn each year before any income tax is due at all.

Above that allowance, England, Wales and Northern Ireland share the same three tax bands: 20% basic rate on income from £12,571 to £50,270, 40% higher rate from £50,271 to £125,140, and 45% additional rate above £125,140. Scotland sets its own bands under devolved powers, with more, narrower steps: 19% starter rate, 20% basic rate, 21% intermediate rate, 42% higher rate, 45% advanced rate, and a 48% top rate above £125,140 — meaning a Scottish taxpayer on a mid-to-high salary generally pays somewhat more income tax than the same salary earns in England, Wales, or Northern Ireland, even though the Personal Allowance itself is identical everywhere.

Personal Allowance, Tapering, and Special Allowances

Your Personal Allowance isn't fixed for everyone. Once your taxable income (after any pension contributions that reduce it) passes £100,000, the allowance shrinks by £1 for every £2 earned above that point, reaching £0 entirely at £125,140 — meaning income between £100,000 and £125,140 is effectively taxed at 60% once you account for the vanishing allowance, a rate higher than even the additional rate band above it. Someone earning £110,000, for example, loses £5,000 of allowance (half of the £10,000 over the threshold), leaving them with a £7,570 Personal Allowance instead of £12,570.

Two allowances can adjust this further. The Blind Person's Allowance adds £3,250 for 2026/27 if you're registered blind (or severely sight-impaired in Scotland and Northern Ireland). The Marriage Allowance lets a spouse or civil partner who doesn't use all of their Personal Allowance transfer £1,260 of it to a partner who's a basic-rate taxpayer, saving the recipient up to £252 a year.

Your actual entitlement is encoded in your PAYE tax code, most commonly a number followed by a letter — 1257L, for instance, means multiply 1,257 by 10 to get a £12,570 allowance, the standard code for 2026/27. Other codes exist for specific situations (BR taxes everything at basic rate, often used for a second job; K codes mean you owe extra tax that reduces your allowance below zero; NT means no tax is deducted at all) — this calculator reads standard 'NNNNL' codes automatically and falls back to the standard allowance for anything else.

National Insurance Explained

National Insurance funds the State Pension and other benefits, and unlike income tax, it's calculated pay-period by pay-period rather than accumulated across the year. As an employee, you pay Class 1 (primary) National Insurance at 8% on earnings between the Primary Threshold (£12,570) and the Upper Earnings Limit (£50,270), then 2% on anything above that — there's no upper cap on the 2% rate.

Your employer separately pays Class 1 (secondary) National Insurance on your behalf, currently 15% on your earnings above the Secondary Threshold of £5,000, with no upper limit at all. This is a real cost to your employer but doesn't come out of your pay, so this calculator shows it as a separate 'employer overhead' estimate rather than a deduction from your salary.

Your NI category letter changes how much either side pays. Most employees are Category A. Category M (under 21) and Category H (apprentices under 25) still pay the standard 8%/2% employee rate, but their employer pays 0% secondary NI on their earnings up to the Upper Secondary Threshold of £50,270 — a significant incentive for businesses to hire younger workers and apprentices. Category C applies once you're over State Pension age: you stop paying employee NI entirely, though your employer's contribution continues as normal.

Workplace Pensions: Three Ways They're Taxed

How your workplace pension contribution is structured changes both your tax bill and your National Insurance — not just how much you save. Salary sacrifice (sometimes marketed as 'smart pension') works by formally reducing your contractual salary in exchange for an equivalent employer pension contribution, so the sacrificed amount is removed before both income tax and National Insurance are calculated — this is the most tax-efficient method, since it also cuts your NI bill, not just your tax bill.

A net pay arrangement deducts your contribution from your gross pay before income tax is calculated, but National Insurance is still charged on your full salary, since the deduction is a payroll process rather than a formal salary change — you get full tax relief, but no NI saving.

Relief at source is different again: your contribution is deducted from your pay after both tax and National Insurance have already been calculated, so it reduces neither your taxable income nor your NI-able income directly. Instead, your pension provider claims basic-rate tax relief (20%) from HMRC and adds it to your pension pot automatically; higher and additional-rate taxpayers must claim the rest back through Self Assessment. For someone contributing 5% of a £48,000 salary (£2,400 a year), salary sacrifice would save roughly £192 more in National Insurance over the year than a net pay arrangement or relief at source would, purely from the NI treatment.

Student Loan Repayments

If you have a student or postgraduate loan, HMRC collects repayments automatically through your payslip once your income crosses your plan's threshold, calculated the same way NI is — on pay above the threshold, not your whole salary. Plan 1 (mostly pre-2012 English and Welsh starters, plus Scottish and Northern Irish students) repays 9% above £26,900 for 2026/27. Plan 2 (English and Welsh starters between 2012 and 2023) repays 9% above £29,385. Plan 4, for Scottish-funded students, repays 9% above £33,795. Plan 5 (English and Welsh starters from August 2023 onward) repays 9% above £25,000. A Postgraduate Loan repays a lower 6% above £21,000, and runs alongside — not instead of — an undergraduate plan if you have both, which is why this calculator offers a combined 'Plan 2 + Postgraduate' option that charges both repayments on the same salary.

Worked Example: £4,000 Gross Monthly Salary

Take Emma, working in Manchester (England) on a gross salary of £4,000 a month — £48,000 a year, no bonus. She pays 5% of her salary into her workplace pension via salary sacrifice, is on standard NI Category A, has no student loan, and uses the standard 1257L tax code with no blind person's or marriage allowance. Here is how her payslip breaks down, step by step.

Step 1 — Pension. Salary sacrifice means her contractual salary is reduced by her 5% contribution before anything else is calculated: £48,000 × 5% = £2,400 a year (£200 a month), leaving £45,600 a year as her pay for both tax and National Insurance purposes.

Step 2 — Personal Allowance and taxable income. Her £45,600 is well under the £100,000 tapering threshold, so she keeps the full £12,570 Personal Allowance. Taxable income is £45,600 − £12,570 = £33,030 a year — £2,752.50 a month.

Step 3 — Income tax. £33,030 sits entirely within the 20% basic rate band (up to £37,700 of taxable income), so her PAYE income tax is simply £33,030 × 20% = £6,606 a year — £550.50 a month.

Step 4 — National Insurance. Her £45,600 NI-able pay is above the £12,570 Primary Threshold and below the £50,270 Upper Earnings Limit, so all of it above the threshold is charged at 8%: (£45,600 − £12,570) × 8% = £2,642.40 a year — £220.20 a month.

Step 5 — Student loan. She has none, so this comes to £0.

Step 6 — Total deductions and net pay. Adding it up: £2,400 pension + £6,606 income tax + £2,642.40 employee NI = £11,648.40 a year in total deductions — £970.70 a month, or 24.27% of her gross salary. Subtracting that from her £4,000 gross leaves a net take-home pay of £3,029.30 a month — £36,351.60 for the year.

For reference, her employer separately pays Class 1 secondary NI of (£45,600 − £5,000) × 15% = £6,090 a year on top of her salary — a cost to her employer, not a deduction from her pay, which is why it doesn't appear in her net figure at all.