Find out exactly how much income tax and National Insurance you pay on your salary and what your monthly take-home pay is. Based on 2026/27 UK tax rates and thresholds. Includes student loan plan deductions.
Income tax in the UK is charged on earnings above the Personal Allowance of £12,570. Tax is calculated in bands — you only pay the higher rate on the portion of income that falls within that band, not on your entire salary.
Employees pay Class 1 National Insurance at 8% on earnings between £12,570 and £50,270, and 2% on earnings above £50,270. NI contributions fund the NHS, state pension and other benefits.
If your income exceeds £100,000 your Personal Allowance is reduced by £1 for every £2 over that threshold. At £125,140 or above the Personal Allowance is reduced to zero.
Student loan repayments are deducted from your salary through PAYE alongside tax and National Insurance. The amount you repay depends on which plan you're on and how much you earn above the repayment threshold. Plan 1 (started before September 2012) has a threshold of £22,015 and repays 9% above this. Plan 2 (September 2012 onwards) has a threshold of £27,295 with 9% repayment. Plan 4 applies to Scottish students with a £27,660 threshold and 9% repayment rate. Plan 5 (from 2023) has a threshold of £25,000 and repays 9% of earnings above this level.
Your tax code appears on your payslip and determines how much tax-free pay you receive each month. The most common tax code for 2026/27 is 1257L, which gives you the full Personal Allowance of £12,570. Your tax code is sent to your employer by HMRC and is based on your circumstances. If your code ends in L you have the standard Personal Allowance. If it ends in M or N you've transferred some allowance to or from your spouse. An emergency tax code (usually 1257L W1 or M1) means you're temporarily paying tax without the benefit of your full allowance, which you can reclaim later. Check your tax code is correct as errors can mean you pay too much or too little tax.
If you have multiple jobs or pensions, you only get one Personal Allowance which is normally used against your main source of income. Your second job will have a different tax code (often BR for Basic Rate) meaning you pay 20% tax on all earnings from that job with no tax-free allowance. This can seem harsh but it ensures you don't get more than one Personal Allowance. At the end of the tax year HMRC will calculate your total tax bill and refund any overpayment. You can also contact HMRC to split your Personal Allowance between jobs if you prefer, though most people find it simpler to use it all against their main employment.
Yes, there are several legitimate ways to reduce your tax bill. Contributing to a workplace pension reduces your taxable income as pension contributions are made before tax is calculated — a £100 pension contribution only costs you £80 if you're a basic rate taxpayer, or £60 if you're a higher rate taxpayer. Using your full ISA allowance (£20,000 per year) means investment growth and interest are completely tax-free. Claiming all eligible expenses if you're self-employed or have employment expenses reduces your taxable profit. Marriage Allowance lets you transfer £1,260 of your Personal Allowance to your spouse if you earn under £12,570 and they're a basic rate taxpayer, saving up to £252 per year. Salary sacrifice arrangements for benefits like childcare vouchers or cycle to work schemes also reduce your taxable salary. Always check you're claiming any tax reliefs you're entitled to such as working from home allowances or professional subscriptions.
Most employees have tax deducted through PAYE and don't need to file a tax return. However, you must complete Self Assessment if you're self-employed, a company director, have income from property or investments over £10,000, earn over £100,000, or receive income from abroad. The deadline for online submission is 31st January following the end of the tax year (so 31st January 2027 for the 2025/26 tax year). You must also pay any tax owed by this date to avoid penalties. If you miss the deadline you'll be charged an automatic £100 penalty even if you don't owe any tax. Register for Self Assessment as soon as you think you might need to complete a return — you can register online through the HMRC website and will receive a Unique Taxpayer Reference within 10 working days.
Your gross salary is your total earnings before any deductions like tax, National Insurance or pension contributions. This is the figure usually quoted in job adverts and employment contracts. Your net salary (or take-home pay) is what actually lands in your bank account after all deductions. The difference between gross and net can be substantial — someone earning £40,000 gross will take home around £31,000 after tax and NI, losing about 23% to deductions. Higher earners lose proportionally more: on £60,000 gross you'll take home around £43,000 (losing 28%). Understanding this difference is crucial when comparing job offers or negotiating salary as a £5,000 gross salary increase might only add £3,000 to your actual take-home pay depending on your tax bracket.
On a salary of £30,000 you pay no tax on the first £12,570 (Personal Allowance). The remaining £17,430 is taxed at the basic rate of 20%, giving income tax of £3,486 per year. For National Insurance you pay 8% on earnings between £12,570 and £30,000, which equals £1,394. Your total deductions are £4,880 per year, leaving take-home pay of £25,120 annually or £2,093 per month. This is an effective tax rate of 16.3% on your total salary.
With a £60,000 salary you use your full Personal Allowance of £12,570 tax-free. You then pay 20% tax on the next £37,700 (up to £50,270) which is £7,540. The remaining £9,730 is taxed at the higher rate of 40%, adding £3,892 in tax. Total income tax is £11,432. For National Insurance you pay 8% on the first £37,700 above the threshold (£3,016) plus 2% on the remaining £9,730 (£195), totaling £3,211. After tax and NI of £14,643 your take-home pay is £45,357 per year or £3,780 per month. Your effective tax rate is 24.4%.
On £150,000 you've exceeded £100,000 so your Personal Allowance is completely eliminated. You pay 20% on £37,700 (£7,540), 40% on £74,870 (£29,948), and 45% on £24,860 (£11,187). Total income tax is £48,675. National Insurance is 8% on £37,700 (£3,016) plus 2% on £99,730 (£1,995), totaling £5,011. Combined deductions of £53,686 leave take-home pay of £96,314 annually or £8,026 monthly. Your effective tax rate is 35.8% — significantly higher than lower earners due to losing the Personal Allowance and paying the additional rate.
Make full use of your £20,000 ISA allowance each tax year as this allows investments and savings to grow completely tax-free with no capital gains tax or income tax on returns. If you're approaching the higher rate threshold of £50,270, increasing pension contributions can keep you in the basic rate band while building retirement savings. Pension contributions reduce your taxable income pound-for-pound, so a £5,000 contribution could save you £2,000 in tax if you're a higher rate payer. Consider timing bonuses or income carefully — if you're close to a tax threshold it may be worth deferring income to the next tax year to avoid paying a higher rate. Married couples should use Marriage Allowance if one partner earns under £12,570 to transfer unused Personal Allowance. Keep accurate records of any work expenses you're entitled to claim such as professional subscriptions, working from home costs, or mileage if you use your own vehicle for work. Check your tax code annually to ensure it's correct as errors are common and can result in overpaying tax for months before it's noticed. If you're self-employed, consider whether incorporating as a limited company might be tax-efficient once your income reaches certain levels, though this comes with additional compliance requirements and should be discussed with an accountant.