UK Take-Home Pay Explained: Income Tax & National Insurance

In the UK, the gap between your gross salary and what actually hits your bank account comes down to two deductions: income tax and National Insurance. Add an optional pension or student loan and you have the full picture of your take-home pay for the 2025/26 tax year.

Income tax and the personal allowance

Everyone gets a tax-free personal allowance of £12,570. Above that, income tax is charged in bands:

• Basic rate — 20% on income from £12,571 to £50,270.
• Higher rate — 40% from £50,271 to £125,140.
• Additional rate — 45% above £125,140.

Like the US, only the income within each band is taxed at that band’s rate — so reaching the 40% band doesn’t mean your whole salary is taxed at 40%.

National Insurance

National Insurance (NI) is a separate contribution that funds the State Pension and certain benefits. Employees pay Class 1 NI at 8% on earnings between £12,570 and £50,270, then 2% on anything above. It’s deducted automatically through PAYE alongside income tax.

The £100,000 trap

Pension and student loans

A salary-sacrifice pension comes out of gross pay before both income tax and NI, making it highly tax-efficient. Student loan repayments, by contrast, are a percentage of income above a plan threshold (for example 9% above £28,470 on Plan 2) — not a tax, but collected the same way.

A worked example

On a £40,000 salary you’d pay roughly £5,486 income tax and £2,194 National Insurance, leaving about £32,320 take-home before any pension. Want the exact figure for your salary, including Scottish rates, pension and student loan? Use our UK salary calculator for a full breakdown.