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How Much Tax Do You Really Pay in the UK?

-5 min read

Uncover exactly how much tax you pay in the UK—from Income Tax and National Insurance to pension and student loan deductions—in clear, simple steps.

KKnowing your gross salary is just one part of the process; working out your net pay after all the deductions is truly a complicated endeavor. Let us simplify each major tax component so you can see where your money goes.

1. Income Tax Bands and Rates

Income tax in the UK is tiered. For 2024/25:

  • Personal Allowance: The first £12,570 so remains without taxation
  • Basic Rate: 20% between £12,571 and £50,270
  • Higher Rate: 40% from £50,271 to £125,140
  • Additional Rate: 45% on incomes over £125,140

Taxable income is the income that remains after subtracting the personal allowance. Check for updated Income Tax rates here.

2. National Insurance Contributions (NIC)

NICs are aimed at paying for state benefits, like the State Pension. For employees, Class 1 rates:

  • Primary Threshold: £12,570 (0%)
  • Between Primary Threshold and Upper Earnings Limit: 8% on earnings £12,571 – £50,270
  • Above Upper Earnings Limit: 2% on earnings above £50,270

The employer also pays NIC at 13.8% on earnings above £9,100. Check for updated NIC rates here.

3. Other Deductions to Take into Account

  • Pension Contributions: If you go for salary sacrifice or a net pay arrangement, you will save up tax and NICs but will find your take-home salary will reduce.
  • Student Loan Repayments: Plan 1, 2 or Postgraduate, all deducted at 9% or 6% above thresholds.
  • Other Workplace Costs: Childcare vouchers, cycle-to-work schemes, etc. will adjust your taxable pay.

4. Sample Calculation

If you earn £40,000 in a year:

  1. Income Tax

    • Personal Allowance: £12,570
    • Taxable Income: £40,000 − £12,570 = £27,430
    • Income Tax: £27,430 × 20% = £5,486.00

  2. Employee National Insurance (Class 1 NICs)

    • Primary Threshold: £12,570
    • Upper Earnings Limit (UEL): £50,270
    • NIC Rates:
      • 8% on earnings between £12,570 and £50,270
      • 2% on earnings above £50,270
    • Since £40,000 is below the UEL, all NICs are at the 8% rate:
    • NIC Taxable Income: £40,000 − £12,570 = £27,430
    • NIC: £27,430 × 8% = £2,194.40

  3. Total Deductions

    • Income Tax: £5,486.00
    • NIC: £2,194.40
    • Total Deductions: £5,486.00 + £2,194.40 = £7,680.40

  4. Net Pay

    • Gross Salary: £40,000.00
    • Net Pay: £40,000.00 − £7,680.40 = £32,319.60

5. Tools to Make Your Calculation Simpler

  • Access an online Income Tax calculator for exact numbers.
  • Try our very own tool below to see your net pay take away instantly.

Ready to see your real take-home pay?
Calculate your salary and tax deductions now