Take home salary calculator UK - Experlu UK (2024)

What is the Take-home salary?

Your take home pay, sometimes called net pay or net salary, is the amount of money you receive after deductions, such as tax, national insurance, pension contributions, and student loan payments.

Gross monthly salary is the money you receive as an employee every month. It includes benefits like bonuses, overtime, travel, and medical allowance. This gross figure has none of the required deductions applied.

Take-home pay = Gross salary - All deductions like employee NIC, income tax, pension, etc.

Your payslip will show your gross and take home pay and a summary of your deductions. You will also find your tax code and payroll number on your paycheck, which influences how much tax and national insurance you pay.

Why is knowing your take home pay important?

When you look for a job, the salary is commonly estimated as gross and not net salary.

Gross salaries differ substantially from what you take home, so only analysing your gross wage can give a wrong idea of your net income. Knowing your take-home pay allows you to assess your financial situation and create a budget accurately.

Analysing your net salary when looking for a new position can enable you to understand your financial situation better and negotiate a salary that suits your needs.

Taxes in the UK

Our simple salary take-home pay calculator provides an estimate of your take-home pay after your company has made deductions from your gross salary. These include income tax as well as NI payments. It does not consider pensions, student loan deductions, other employee benefits etc.

Income Tax

Income tax is paid on your earnings. The system relies on marginal tax rates, with your total tax payment based on a percentage of your income within certain limits. Therefore, you would not be taxed at a flat rate on everything you earn.

For beginners, everyone is entitled to receive a set amount of income tax-free. This is your personal allowance, which amounts to £12,570 for the tax year 2023–2024.

Then, if your income is between £12,570 and £50,270, you will pay 20% tax, and if it is between £50,270 and £125,140, you will pay 40%. Anything you make over £125,140 is subject to a 45% tax rate. The high band was £150,000 for the tax year 2022-23.

Your tax-free personal allowance is reduced by £1 for every £2 you earn beyond £100,000. This implies that more of your overall income is taxed as you receive more beyond that figure.

National Insurance (NI)

Anyone who makes above a specific limit must pay National Insurance (NI) in addition to income tax. You must make this required payment to be eligible for some state benefits, such as the State Pension and the Jobseeker's Allowance.

Employees often pay Class 1 NI contributions, while Class 2 NI contributions are required for self-employed individuals. As with income tax, you'll only pay higher rates of NI on earnings over a specific limit— rather than paying the top band on all your income.

Employees pay 'primary' Class 1 National Insurance contributions. Your employer makes "Secondary" Class 1 National Insurance contributions. Both types of Class 1 NI are collected using the employer's PAYE system.

Employees' Class 1 NI contributions are deducted at 10% (12% till 05 January 2024) of your pay between the primary limit of £242 per week and the upper earnings limit of £967 per week in 2023-24 and at 2% on income above that.

Student Loan Repayments

Uk students must pay their student loan debt once they earn over a certain threshold.

You will have to make Plan 1 loan repayments if your class started before 01 September 2012 or if your loan is from the Northern Irish or Scottish student finance organisations.

Anyone whose course began in England or Wales after 01 September 2012 is subject to Plan 2 repayments.

Pension

Your company will set up a workplace pension for you. A portion of your wages is automatically contributed to your pension plan each time you receive a paycheck. Additionally, your employer must make a monthly contribution on your behalf.

If you contribute to a workplace pension, your payment will be deducted from your gross pay, lowering your take-home pay. The amount you and your employer contribute to the pension plan and whether or not you were automatically registered depends on the type of workplace pension plan.

Companies must contribute a minimum of 3%, and employees must contribute 5%, for a total contribution requirement of 8%.

Workplace Advantages

Workplace benefits like company automobile or health insurance may change your tax code, impacting your deductions and net earnings. Your take-home pay will be affected if you pay back a season ticket or a cycle-to-work plan loan.

In addition, any commissions, bonuses, or overtime will impact the total amount you earn. The receipt of expenditures and your payroll compensation will influence your net earnings. These, on the other hand, are not taxed.

Additional deductions, including union dues, charitable donations, court orders (for unpaid fines or debt repayments to creditors), and child maintenance (paid by the Child Maintenance Service under a Deduction from Earnings Order), must also be considered.

How does Take home salary calculator work?

• Include any additional benefits, such as bonuses or overtime, in your annual gross salary.
• The Salary calculator will calculate take-home daily, monthly, weekly, or annual salary.
• The salary take home calculator assumes that you are entitled to personal allowance and are not claiming it elsewhere or as part of a second job.

How to manage your UK tax?

Your ability to manage your tax payments will depend on your employment status. The most typical methods used in the UK to collect income tax fall into the categories listed below.

PAYE Tax

Most companies pay tax through the Pay As You Earn (PAYE) system. This implies that before your income enters your bank account, your company will deduct income tax, NI, and student loan payments directly from your gross pay.

Taxpayers whose tax is calculated from PAYE will not generally need to file a tax return unless they have other income sources or earn over £100,000.

UK Self-Assessment Tax Returns

You must typically file an annual self-assessment tax return if you are self-employed or have income over £100,000 per year. Returns are generally due in January and can be challenging — frequently requiring an accountant's help and support.

You must either register online or fill out a paper copy to submit a tax return to HMRC. In UK self-assessment tax forms, you should include details of all income, pension contributions, benefits, allowances, and charitable donations.

Once your self-assessment tax return has been filled and accepted by HMRC, you will generally have to pay in two stages in January and July each year.

How to increase take-home salary?

• Education
  The level of education plays a significant role in one's average lifetime earnings. Improving the relevant experience or skills relating to a niche profession or industry can increase take-home salary.
  This may include staying up-to-date on current events within the market segment by attending relevant meetings or spending free time reading on the subject.
• Experience
  The more experience an individual has within his field or profession, the more likely his take home salary will increase over time. Employers see the experience as a positive indicator and are more willing to raise a worker's salary.
• Performance Reviews
  The annual performance reviews of the worker also determine the pay rise. If the employer provides strong and favourable reviews, the wage increase will probably be higher.
  The performance review typically entails a conversation between workers and employers regarding the last one-year work initiatives, projects undertaken, and the employee's accomplishments.
• Negotiate
  When starting a job, you can always try negotiating for higher pay, if possible. You can illustrate your past performances and any valuable achievement with your previous employer that might justify a raise.
• Change jobs
  If individuals cannot increase their wages, they may consider changing jobs. Switching the position may give you a considerable hike.