How Much Tax Do You Really Pay in the UK?

Your gross salary is not your money. Somewhere between your employer's payroll system and your bank account, income tax and National Insurance take a chunk. Then there are pension contributions, student loan repayments, and possibly other deductions. Here is where it all goes.

Income tax bands for 2025/26

UK income tax is progressive. You pay higher rates only on the portion of your income that falls into each band — not on the whole lot.

Band	Taxable income	Rate
Personal Allowance	£0 – £12,570	0%
Basic rate	£12,571 – £50,270	20%
Higher rate	£50,271 – £125,140	40%
Additional rate	Over £125,140	45%

If you earn over £100,000, your Personal Allowance shrinks by £1 for every £2 above that threshold. By £125,140 it is gone entirely, creating an effective 60% marginal rate on income between £100,000 and £125,140.

Full details at GOV.UK Income Tax rates.

National Insurance (employee)

National Insurance is a separate deduction from income tax. For employees (Class 1) in 2025/26:

Earnings	Rate
Below £12,570	0%
£12,570 – £50,270	8%
Above £50,270	2%

Your employer also pays NI on your salary at 15% on earnings above £5,000 per year. You never see that deduction on your payslip, but it is a real cost of employing you. See GOV.UK NI rates.

Other deductions you might see

• Pension contributions — Auto-enrolment minimum is 5% of qualifying earnings (3% employee, plus tax relief). Salary sacrifice schemes reduce your gross pay instead, saving you NI as well.
• Student loan repayments — 9% above the threshold for Plan 1, 2, 4, or 5. Postgraduate loans are 6% above their threshold. These run simultaneously if you have both.
• Payroll deductions — Cycle to work, childcare vouchers, or other benefits your employer offers through salary sacrifice.

Worked example: £40,000 salary

Here is the full breakdown for someone earning £40,000 with no pension, no student loan, and the standard tax code (1257L).

Income tax:

Slice	Calculation	Tax
Personal Allowance (£12,570)	£12,570 x 0%	£0
Basic rate (£27,430)	£27,430 x 20%	£5,486
Total income tax		£5,486

Employee National Insurance:

Slice	Calculation	NI
Below threshold (£12,570)	£12,570 x 0%	£0
8% band (£27,430)	£27,430 x 8%	£2,194
Total employee NI		£2,194

Summary:

	Annual	Monthly
Gross salary	£40,000	£3,333
Income tax	-£5,486	-£457
Employee NI	-£2,194	-£183
Take-home pay	£32,320	£2,693

That is an effective tax rate of 19.2% — not the 20% basic rate you might expect. The Personal Allowance brings the average down.

What your employer pays on top:

Your employer also pays 15% NI on your earnings above £5,000. On a £40,000 salary, that is £35,000 x 15% = £5,250. So employing you costs the company £45,250 before they even think about office space, equipment, or pension contributions.

How to check your own numbers

Payslip maths is not always obvious, especially once pension and student loan deductions enter the picture. The quickest way to see your actual take-home is to run your salary through our calculator — it handles all the bands, thresholds, and deduction types for 2025/26.

If something looks wrong on your payslip, check your tax code with HMRC first. A wrong tax code is the most common reason for unexpected deductions.