Understanding your UK take-home pay in 2026/27
The gap between the salary in a job offer and the money that arrives in your bank account surprises almost everyone — in both directions. This guide walks through each deduction in the order payroll applies it, using the rates for the 2026/27 tax year (6 April 2026 to 5 April 2027) for England, Wales and Northern Ireland; Scotland sets different income tax bands.
1. Personal allowance — the tax-free slice
The first £12,570 of income is normally free of income tax. This personal allowance has been frozen at £12,570 for several years — a freeze that quietly raises taxes each year as pay rises push more of your income above it (so-called fiscal drag).
2. Income tax — banded, not flat
Income tax applies in slices to income above the allowance: 20% on the first £37,700 of taxable income (i.e. up to £50,270 of salary), 40% up to £125,140, and 45% beyond. A crucial point people get wrong: moving into a higher band does not re-tax your earlier income. A £51,000 salary pays 40% only on the £730 above the threshold — not on the whole £51,000.
3. The £100,000 trap — a hidden 60% rate
Above £100,000 of income, the personal allowance is withdrawn at £1 for every £2 earned. Losing tax-free allowance while paying 40% tax produces an effective rate of 60% on income between £100,000 and £125,140 — higher than the official top rate. If a pay rise lands you in this window, pension contributions (which reduce income for the taper) are unusually valuable; our take-home pay calculator models the taper so you can see the effect on your own numbers.
4. National Insurance — a second income tax with different thresholds
Employee Class 1 National Insurance takes 8% of earnings between £12,570 and £50,270 a year, and 2% above that. Notice the shape: NI is regressive at the top — the marginal rate falls from 8% to 2% just as income tax rises from 20% to 40%, which is why the combined marginal rate is 28% for basic-rate payers and 42% for higher-rate payers. Your employer separately pays employer's NI (15% above £5,000) — invisible on your payslip, very visible to anyone comparing employment against contracting.
5. Student loans — a percentage above a plan-specific threshold
Student loan repayments are 9% of income above your plan's threshold (6% for postgraduate loans). For 2026/27 the thresholds are: Plan 1 £26,900; Plan 2 £29,385; Plan 4 (Scotland) £33,795; Plan 5 £25,000; postgraduate £21,000. Two things follow: repayments stop automatically in low-earning months, and a graduate on Plan 2 with a postgraduate loan faces a combined 15% on income above both thresholds — pushing their marginal rate into the mid-50s once higher-rate tax and NI are included.
6. Pension contributions — the deduction that isn't a loss
Workplace pension contributions reduce your taxable income (in the common "net pay" arrangement), so a £100 contribution costs a basic-rate taxpayer only £80 of take-home pay, and a higher-rate taxpayer £60. It's the only line on the payslip where the money is still yours.
Putting it together
On a £40,000 salary in 2026/27 with no pension or student loan: income tax of £5,486, National Insurance of £2,194, take-home about £32,320 — roughly 81% of gross. At £60,000 the proportion kept falls to about 76%; at £120,000 (inside the taper), around 63%. The pattern to internalise: every extra pound is taxed at your marginal rate, but your overall deduction percentage is always lower — so a pay rise is never "not worth it because of tax", with the near-exception of the £100k window, where careful pension planning genuinely matters.
Rates and thresholds above are the 2026/27 figures published on GOV.UK (income tax), GOV.UK (National Insurance) and GOV.UK (student loans), last verified 24 July 2026. Scotland's income tax bands differ. This is general information, not tax advice.