Incomes
Gross vs Net Income Explained UK
What's the difference between gross and net pay? Understanding your salary before and after deductions, and why both figures matter.
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3 min read
Understanding gross vs net helps you budget accurately and understand your payslip.
Basic Definition
Gross Pay
| What It Is |
Details |
| Total pay |
Before deductions |
| Includes |
Base salary + bonuses |
| Headline figure |
Job adverts use this |
| Your “salary” |
In contracts |
Net Pay
| What It Is |
Details |
| Take-home pay |
What you actually receive |
| After |
All deductions |
| In your bank |
Each payday |
| Spending money |
What you have |
Simple Example
| Element |
Amount |
| Gross monthly |
£3,000 |
| Income Tax |
-£400 |
| National Insurance |
-£200 |
| Pension |
-£150 |
| Net pay |
£2,250 |
What’s Deducted
Typical Deductions
| Deduction |
What It Is |
| Income Tax |
Tax on earnings |
| National Insurance |
Contributions to state benefits |
| Pension |
Workplace pension |
| Student Loan |
If applicable |
| Other |
Childcare vouchers, unions, etc. |
Income Tax 2025/26
| 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% |
National Insurance 2025/26
| Earnings |
Rate |
| Below £12,570 |
0% |
| £12,570 - £50,270 |
12% |
| Above £50,270 |
2% |
Student Loan
| Plan |
Threshold |
Rate |
| Plan 1 |
£24,990 |
9% |
| Plan 2 |
£27,295 |
9% |
| Plan 4 |
£31,395 |
9% |
| Plan 5 |
£25,000 |
9% |
| Postgrad |
£21,000 |
6% |
Example Calculations
£30,000 Gross Salary
| Element |
Annual |
Monthly |
| Gross salary |
£30,000 |
£2,500 |
| Income Tax |
-£3,486 |
-£290 |
| National Insurance |
-£2,092 |
-£174 |
| Net (no pension) |
£24,422 |
£2,035 |
With 5% Pension
| Element |
Annual |
Monthly |
| Gross salary |
£30,000 |
£2,500 |
| Pension (5%) |
-£1,500 |
-£125 |
| Taxable |
£28,500 |
- |
| Income Tax |
-£3,186 |
-£266 |
| National Insurance |
-£1,912 |
-£159 |
| Net |
£23,402 |
£1,950 |
£50,000 Gross Salary
| Element |
Annual |
Monthly |
| Gross salary |
£50,000 |
£4,167 |
| Income Tax |
-£7,486 |
-£624 |
| National Insurance |
-£4,492 |
-£374 |
| Net (no pension) |
£38,022 |
£3,168 |
£75,000 Gross Salary
| Element |
Annual |
Monthly |
| Gross salary |
£75,000 |
£6,250 |
| Income Tax |
-£17,486 |
-£1,457 |
| National Insurance |
-£4,992 |
-£416 |
| Net (no pension) |
£52,522 |
£4,377 |
Quick Reference Table
Annual Gross to Net (No Pension)
| Gross |
Income Tax |
NI |
Net |
Monthly Net |
| £20,000 |
£1,486 |
£892 |
£17,622 |
£1,469 |
| £25,000 |
£2,486 |
£1,492 |
£21,022 |
£1,752 |
| £30,000 |
£3,486 |
£2,092 |
£24,422 |
£2,035 |
| £35,000 |
£4,486 |
£2,692 |
£27,822 |
£2,319 |
| £40,000 |
£5,486 |
£3,292 |
£31,222 |
£2,602 |
| £45,000 |
£6,486 |
£3,892 |
£34,622 |
£2,885 |
| £50,000 |
£7,486 |
£4,492 |
£38,022 |
£3,168 |
| £60,000 |
£11,486 |
£4,692 |
£43,822 |
£3,652 |
| £70,000 |
£15,486 |
£4,892 |
£49,622 |
£4,135 |
Reading Your Payslip
Gross Section
| Shows |
Meaning |
| Basic pay |
Monthly salary |
| Overtime |
Extra hours if applicable |
| Bonuses |
One-off payments |
| Gross pay |
Total before deductions |
Deductions Section
| Shows |
Meaning |
| PAYE tax |
Income tax via employer |
| NI |
National Insurance |
| Pension |
Your contribution |
| Student loan |
If applicable |
| Other |
Various |
Net Pay Section
| Shows |
Meaning |
| Net pay |
Your take-home |
| Bank credit |
What’s paid |
| Year to date |
Cumulative figures |
Why Gross Matters
When Gross Is Used
| Situation |
Uses Gross |
| Job salaries |
Always |
| Tax returns |
Declared income |
| Mortgage applications |
Affordability |
| Benefit calculations |
Some use gross |
| Pension calculations |
Often |
Mortgage Example
| Lender Check |
Based On |
| Income multiple |
Gross salary |
| 4.5 × £50,000 |
= £225,000 max |
| Not |
Net salary |
Why Net Matters
When Net Is Used
| Situation |
Uses Net |
| Budgeting |
What you spend |
| Rent affordability |
What you have |
| Monthly planning |
Actual cash |
| Comparing jobs |
Real impact |
Comparing Job Offers
| Job A |
Job B |
| £35,000 gross |
£38,000 gross |
| London |
Manchester |
| Looks worse |
Looks better |
| After Analysis |
Job A |
Job B |
| Net pay |
£27,822 |
£29,400 |
| Rent |
-£1,200 |
-£700 |
| Commute |
-£200 |
-£100 |
| Disposable |
£1,230/m |
£2,000/m |
Tax Codes
What They Mean
| Code |
Meaning |
| 1257L |
Standard (£12,570 allowance) |
| BR |
All taxed at basic rate |
| 0T |
No allowance |
| K codes |
You owe tax |
Affects Net Pay
| Wrong Tax Code |
Impact |
| Too high |
Pay too little tax |
| Too low |
Pay too much tax |
| Check payslip |
Regularly |
| Query HMRC |
If wrong |
Self-Employment
Different Calculation
| Employed |
Self-Employed |
| Deducted by employer |
Pay yourself |
| Monthly PAYE |
Quarterly/annual |
| Regular |
Variable |
| Net is clear |
Must calculate |
Self-Employed Must
| Action |
Why |
| Track gross income |
All earnings |
| Calculate deductions |
Yourself |
| Set aside |
For tax bills |
| Budget on net |
After putting tax aside |
Summary
| Term |
Meaning |
| Gross |
Before deductions |
| Net |
After deductions (take-home) |
| Always quoted |
Gross in job adverts |
| Budget with |
Net |
| Quick Formula |
|
| Gross salary |
£_____ |
| Less: Tax |
-£_____ |
| Less: NI |
-£_____ |
| Less: Pension |
-£_____ |
| Less: Other |
-£_____ |
| Net pay |
£_____ |