Gross vs Net Pay: What Comes Off Your UK Payslip

Gross pay vs net pay in one sentence each

Gross pay: your salary or wages, plus overtime, bonus, commission and holiday pay, before any deductions. If your contract says £35,000 a year, that is your gross annual salary.

Net pay: gross pay minus all deductions. It is the figure shown as "net pay" at the bottom of your payslip and the amount paid to you.

Deductions you will see on a UK payslip

Employers must give you a payslip showing gross pay, each deduction and net pay. The common lines are:

• PAYE income tax: 20%, 40% or 45% (Scotland 19% to 48%) on pay above your tax-free allowance, controlled by your tax code.
• National Insurance: 8% of earnings between £1,048 and £4,189 a month, 2% above, worked out each pay period.
• Pension: auto-enrolment minimum is 8% of qualifying earnings, of which at least 5% usually comes from you (including tax relief). Shown either before tax (net pay arrangement or salary sacrifice) or after tax (relief at source).
• Student loan: 9% of pay above your plan's threshold (6% for postgraduate loans).
• Other: salary sacrifice schemes (cycle to work, electric car), union fees, give-as-you-earn charity donations, attachment of earnings orders.

Worked example: £35,000 gross to net (England, 2026/27)

Assume a £35,000 salary paid monthly, tax code 1257L, a 5% pension contribution under a net pay arrangement (deducted before tax) and a Plan 2 student loan.

Gross monthly pay is £2,916.67. The pension takes £145.83, leaving £2,770.84 of taxable pay. Subtract the monthly tax-free allowance of about £1,047.50, and 20% of the remaining £1,723.34 gives £344.67 tax. NI is charged on the full £2,916.67 (net pay pension does not reduce NI): (£2,916.67 minus £1,048) x 8% = £149.49. The student loan is 9% of (£2,916.67 minus £2,448) = £42 (rounded down).

Gross to net at common salaries

Income tax and employee NI only, England, standard code, no pension or student loan.

Why your net pay changes month to month

• Tax code change: HMRC may adjust your code to collect underpaid tax or account for benefits in kind.
• Emergency code (1257L W1/M1 or 0T) after starting a new job without a P45.
• Overtime or bonuses: higher pay in one month means more tax, NI and student loan in that month.
• Five-Friday months for weekly-paid staff.
• Statutory pay: sick, maternity or paternity pay replacing normal wages.

Quick rules for gross to net

For a pay rise or overtime, what matters is your marginal rate: how much of each extra £1 you keep. In England in 2026/27, between £12,570 and £50,270 you keep 72p (20% tax, 8% NI). Between £50,270 and £100,000 you keep 58p. Between £100,000 and £125,140 you keep only 38p, and above that 53p. Add 9p of student loan deduction if you are above your plan's threshold.

In Scotland the figures differ: you keep 71p at the 21% intermediate rate, 50p between £43,663 and £50,270, and 56p between £50,270 and £75,000.

Hourly workers can convert gross to net the same way. At £15 an hour for 37.5 hours (£29,250 a year), income tax is £3,336 and NI £1,334.40, so net pay is about £12.60 an hour.

Gross pay is not what you cost your employer

Your employer pays more than your gross salary. On top of it they pay 15% employer NI above £5,000 and at least 3% employer pension on qualifying earnings. Neither appears in your gross pay.

For a £35,000 employee paying 5% into a relief-at-source pension, with a 3% employer contribution on the whole salary, the employer pays £4,500.00 employer NI and £1,050.00 pension. Total employment cost is about £40,550. The employee takes home £27,319.60, or about 67% of what the job costs the employer. This is why salary sacrifice, which cuts employer NI, is often paired with a top-up to the pension.

Working backwards: the gross salary you need for a net target

To find the gross salary for a take-home target, divide the extra net pay you need by the share you keep at your marginal rate. In England that is 72p per £1 in the basic-rate band and 58p in the higher-rate band.

Example: you want £3,000 a month (£36,000 a year) after tax and NI, with no pension or student loan. The gross salary needed in England in 2026/27 is about £45,112. Add a 5% pension and you need more, because the pension comes out of your pay too, although tax relief softens the cost.

How to check your net pay is right: a payslip routine

• Check the tax code against your HMRC app. 1257L (S1257L or C1257L) is standard. Anything else should have a reason you recognise.
• Check the NI letter. Most people should be A. Under-21s are M, and people over State Pension age are C.
• Check year-to-date taxable pay against gross pay. If you sacrifice salary, taxable pay should be lower.
• Recalculate one month: subtract £1,047.50 of tax-free pay, tax the rest at 20% up to £3,141.67, and charge NI at 8% between £1,048 and £4,189.
• Check pension deductions against your scheme's rate and qualifying earnings band (£6,240 to £50,270 a year for auto-enrolment minimums).

Deductions that come after net pay

Not every deduction reduces your tax. Some come off before tax is worked out (salary sacrifice, net pay pensions and payroll giving), while others come out of pay that has already been taxed (student loan, relief-at-source pension contributions, union subscriptions and court-ordered attachments).

The test is whether the line sits above or below "taxable pay". Salary sacrifice and net pay pensions sit above it and reduce tax. Relief-at-source pension contributions and student loan sit below it. The pension provider claims basic-rate relief separately, and higher-rate relief is reclaimed through HMRC.