How Take-Home Pay Is Calculated

Take-home pay is what is left of your gross salary after income tax, National Insurance and any pension or student loan deductions. Here is the exact sequence, using a £45,000 salary in England for 2026/27.

Step 1 — Start with gross pay

£45,000 a year.

Step 2 — Take off the Personal Allowance

The first £12,570 is tax-free, leaving taxable income of £32,430.

Step 3 — Apply the tax bands in slices

All £32,430 falls inside the 20% basic-rate band (which runs to £37,700 of taxable income), so income tax is £32,430 × 20% = £6,486.00. Higher earners pay 40% only on the slice above the band, never on everything.

Step 4 — National Insurance

NI is separate from income tax and ignores the tax bands: 8% of earnings between £12,570 and £50,270. On £45,000 that is 8% of £32,430 = £2,594.40.

Step 5 — The result

£45,000 − £6,486.00 − £2,594.40 = £35,919.60 take-home, or £2,993.30 a month. Pension contributions (under a net pay arrangement) come off before step 2, which is why they save tax; student loan repayments are calculated on gross pay above your plan threshold and come off at the end.

Run your own salary through the take home pay calculator to see the same steps with your numbers.