How UK PAYE works: from gross to take-home pay
Under PAYE (Pay As You Earn), your employer deducts Income Tax and National Insurance directly from your salary before it reaches your bank account, based on HMRC's rules and your tax code. Two separate calculations run in parallel: Income Tax, which is progressive and based on your annual taxable income, and National Insurance, which funds the State Pension and NHS and is calculated using its own thresholds. On top of these statutory deductions, many employees also have pension contributions and, if applicable, student loan repayments taken from their pay automatically.
The starting point for Income Tax is the Personal Allowance — the slice of your income that is tax-free. For most people in the current tax year this is £12,570. Above that threshold, tax is charged in bands: the first portion at the basic rate, the next portion at the higher rate, and anything beyond the top threshold at the additional rate. Crucially, moving into a higher band does not mean all your income is taxed at that rate — only the slice of income that falls within that band is.
Income Tax bands for England, Wales and Northern Ireland
This calculator uses the following Income Tax bands, which apply to taxpayers in England, Wales and Northern Ireland:
| From | To | Rate |
|---|---|---|
| £0 | £12,570 | 0% (Personal Allowance) |
| £12,570 | £50,270 | 20% (Basic rate) |
| £50,270 | £125,140 | 40% (Higher rate) |
| £125,140 | and above | 45% (Additional rate) |
Scotland sets its own Income Tax bands and rates, which differ from the table above — National Insurance and the Personal Allowance remain the same UK-wide.
What National Insurance pays for
Class 1 National Insurance contributions are deducted at 8% on earnings between the Primary Threshold (around £12,570 a year) and the Upper Earnings Limit (around £50,270 a year), and at 2% on earnings above that. Unlike Income Tax, NI contributions build your entitlement to the State Pension and certain contributory benefits, and also help fund the NHS. NI is technically calculated per pay period rather than on annual income, so this calculator's annualised result is a close estimate rather than an exact payslip figure.
The Personal Allowance taper for high earners
Once your income passes £100,000, the £12,570 Personal Allowance starts shrinking — it falls by £1 for every £2 earned above that threshold, disappearing completely at £125,140. Because you're losing tax-free allowance and paying 40% higher-rate tax at the same time, income in this band is effectively taxed at around 60%, one of the steepest marginal rates in the UK system even though it isn't a headline tax band. This calculator applies the taper automatically when your gross income (minus pension contributions) falls in that range.
Student loan repayments follow a similar "above a threshold" structure to Income Tax, but with their own thresholds depending on which repayment plan applies to you (Plan 1, Plan 2, Plan 4 or the Postgraduate Loan), each charged at either 9% or 6% of income above that plan's threshold. If you're unsure which plan applies, check your student finance account — this calculator lets you select the plan that matches your situation, or "None" if you have no student loan.