How Your UK Salary is Calculated (2025/2026 Guide)
The Basics: Gross vs Net Pay
Understanding your payslip can be confusing. This calculator uses the latest rates for the 2025/2026 financial year to clarify exactly where your money goes.
- Gross Pay: Your total salary before any deductions. This is the figure stated in your employment contract (e.g., £30,000 per year).
- Net Pay (Take-Home): The actual amount that lands in your bank account. It is calculated as: Gross Pay minus Income Tax, National Insurance, and other deductions (like pensions).
Understanding Your Tax Code: 1257L
Most employees in the UK are on the standard tax code 1257L. Here is what it means:
- 1257: Represents your tax-free Personal Allowance of £12,570. You can earn this amount every year before paying any Income Tax.
- L: Indicates you are entitled to the standard tax-free Personal Allowance.
Common Tax Code Letters
| Code | What it Means |
|---|---|
| L | Standard tax-free Personal Allowance (£12,570). |
| M | Marriage Allowance: receiving 10% of a partner's allowance. |
| N | Marriage Allowance: transferring 10% to a partner. |
| BR | Basic Rate: All income taxed at 20% (common for second jobs). |
| K | You have untaxed income worth more than your allowance. |
Income Tax Rates (2025/2026)
The UK has a progressive tax system, meaning you only pay higher rates on the portion of your salary that falls into that band.
England, Wales & Northern Ireland
| Band | Income Range | Tax 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% |
Scotland (Separate Tax Bands)
Note: Scotland has different tax bands compared to the rest of the UK.
| Band | Income Range | Tax Rate |
|---|---|---|
| Starter | £12,571 – £15,397 | 19% |
| Basic | £15,398 – £27,491 | 20% |
| Intermediate | £27,492 – £43,662 | 21% |
| Higher | £43,663 – £75,000 | 42% |
| Advanced | £75,001 – £125,140 | 45% |
| Top | Over £125,140 | 48% |
National Insurance (NI)
National Insurance helps fund the NHS, state benefits, and the state pension. If you are an employee (Class 1 NI), your rates are:
- 0% on earnings up to £12,570.
- 8% on earnings between £12,570 and £50,270.
- 2% on earnings over £50,270.