Working out your take-home pay can feel complicated, but once you understand each deduction, the maths is straightforward. This guide walks you through every step — from gross salary to net pay — using the 2025/26 tax rates.
Step 1: Start with Your Gross Salary
Your gross salary is your total pay before any deductions. This is the figure on your employment contract. For this example, we'll use a salary of £45,000 per year.
Your gross salary may also include bonuses, overtime, or benefits in kind — but for simplicity, we'll stick to a straightforward annual salary here.
Step 2: Deduct Pension Contributions
If you have a workplace pension, contributions are typically taken before tax is calculated (via salary sacrifice) or after tax (personal contributions with tax relief added later). Most auto-enrolment schemes use salary sacrifice.
The minimum employee contribution under auto-enrolment is 5% of qualifying earnings. On a £45,000 salary, assuming contributions apply to earnings above £6,240 (the qualifying earnings lower threshold), that's roughly £1,938 per year, reducing your taxable income to approximately £43,062.
For this example, we'll assume no pension contribution to keep the calculation clear.
Step 3: Calculate Income Tax (PAYE)
Income tax is calculated on your taxable income — your gross salary minus your personal allowance and any pension contributions. The personal allowance for 2025/26 is £12,570.
Income tax on £45,000 (2025/26):
- Personal allowance: £12,570 — tax: £0
- Basic rate (20%) on £12,571–£45,000 = £32,430 × 20% = £6,486
- Total income tax: £6,486
The higher rate of 40% only kicks in on earnings above £50,270, so our £45,000 earner stays entirely within the basic rate band.
Step 4: Calculate National Insurance Contributions
Employee National Insurance (Class 1) is charged on earnings above the Primary Threshold of £12,570 per year. In 2025/26, the rates are:
- 8% on earnings between £12,570 and £50,270
- 2% on earnings above £50,270
NI on £45,000 (2025/26):
- NI band: £12,571–£45,000 = £32,430 × 8% = £2,594.40
- Total NI: £2,594.40
Step 5: Student Loan Repayments
If you have a student loan, repayments are taken through the PAYE system along with your tax and NI. The repayment threshold depends on your plan:
- Plan 1: 9% on earnings above £24,990
- Plan 2: 9% on earnings above £27,295
- Plan 4 (Scotland): 9% on earnings above £31,395
- Postgraduate loan: 6% on earnings above £21,000
Plan 2 student loan on £45,000:
- £45,000 − £27,295 = £17,705 × 9% = £1,593.45 per year
Step 6: Your Take-Home Pay
Summary for £45,000 gross (no pension, Plan 2 student loan):
- Gross salary£45,000.00
- Income tax−£6,486.00
- National Insurance−£2,594.40
- Student loan (Plan 2)−£1,593.45
- Take-home pay£34,326.15
- Monthly£2,860.51
Why the Numbers Might Differ Slightly
Real-world payslips can vary due to: employer payroll rounding, different qualifying earnings thresholds for pension, emergency tax codes applied by new employers, benefits in kind (company car, health insurance), and mid-year pay rises that cause tax to be spread unevenly across the year.
Our calculator uses the most accurate available rates and gives a reliable estimate for the full tax year. For exact figures, check with your employer or HMRC.