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How take-home pay is calculated: a worked example

Reviewed by ClearPayslip editorial teamUpdated on Methodology

Short answer

A £45,000 salary in England becomes £35,919.60 of take-home pay in 2026/27: £6,486.00 of Income Tax and £2,594.40 of National Insurance. With a Plan 2 student loan and a 5% pension it is £32,714.25.

1. Personal Allowance

The first £12,570 is tax-free. Taxable income is £45,000 − £12,570 = £32,430.

2. Income Tax

All £32,430 falls in the basic rate band (up to £37,700 of taxable income): £32,430 × 20% = £6,486.00.

3. National Insurance

8% on earnings between £12,570 and £50,270: (£45,000 − £12,570) × 8% = £2,594.40.

4. Take-home pay

£45,000 − £6,486.00 − £2,594.40 = £35,919.60 a year, £2,993.30 a month.

5. Adding a Plan 2 student loan and a 5% pension

  • Pension: 5% × £45,000 = £2,250.00, taken before Income Tax (net pay arrangement).
  • Income Tax: (£45,000 − £2,250.00 − £12,570) × 20% = £6,036.00.
  • National Insurance is unchanged at £2,594.40 because it is charged on gross pay.
  • Student loan: (£45,000 − £29,385) × 9% = £1,405.35.
  • Take-home pay: £32,714.25 a year, £2,726.19 a month.

Assumptions

  • We work out take-home pay for the 2026/27 tax year (6 April 2026 to 5 April 2027) from gross annual salary, for one job paid through PAYE with no other income, using the rates HMRC publishes for employers.
  • Income Tax: the Personal Allowance is £12,570. In England, Wales and Northern Ireland taxable income is charged at 20% up to £37,700, 40% up to £125,140 and 45% above. Scottish taxpayers pay 19%, 20%, 21%, 42%, 45% and 48% across six bands set by the Scottish Parliament.
  • The Personal Allowance is reduced by £1 for every £2 of adjusted net income above £100,000, so it is zero from £125,140. This creates an effective 60% Income Tax rate between those amounts (67.5% for Scottish taxpayers).
  • National Insurance: Class 1 employee contributions (category A) of 8% on earnings between £12,570 and £50,270 and 2% above, calculated on an annual basis. Your employer calculates it per pay period, so irregular pay can give a slightly different total.
  • Student loans: 9% of gross pay above the threshold of your plan (Plan 1 £26,900, Plan 2 £29,385, Plan 4 £33,795, Plan 5 £25,000) and 6% above £21,000 for a Postgraduate Loan, which is repaid alongside any undergraduate plan.
  • Pension: we treat the percentage you enter as a workplace pension under a net pay arrangement, taken from gross pay before Income Tax but not before National Insurance or student loan repayments. Relief-at-source schemes give roughly the same result for basic-rate taxpayers; salary sacrifice also saves National Insurance, so it leaves slightly more take-home pay than we show.
  • We do not model tax codes other than 1257L, the Marriage Allowance, the Blind Person's Allowance, benefits in kind, other income, Gift Aid or the High Income Child Benefit Charge.
  • Stamp duty: we apply the residential rates for a single dwelling of Stamp Duty Land Tax (England and Northern Ireland), Land and Buildings Transaction Tax (Scotland) and Land Transaction Tax (Wales), including first-time buyer relief where it exists and the higher rates for additional properties. We do not model the 2% SDLT surcharge for non-UK residents, multiple dwellings, mixed-use or non-residential property, or leases with rent.
  • We review the figures after every UK Budget, Scottish Budget and Welsh Budget, and when HMRC publishes the rates for the next tax year.

Official sources