Income & Employment Guides UK — Maximise Your Earnings

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.

By PocketWise · · 3 min read

Salary and income data is based on ONS and other official UK statistical sources. Figures are averages and may not reflect your individual circumstances.

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 £_____

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Sources

  1. ONS — Annual Survey of Hours and Earnings