How the Calculator Works
This page documents the exact methodology behind every number the calculator produces. We publish this so you can verify our working, replicate the calculation by hand for any salary, and report any inconsistency with your real payslip.
The calculator is deterministic — same inputs always produce the same outputs — and runs entirely in your browser. No salary data is transmitted to our servers.
1. Calculation Order
The calculator runs in this fixed order. Each step uses the output of the previous one:
- Start with gross annual salary (your input)
- Add bonus if entered
- Subtract pre-tax pension contributions (your % × annual gross)
- Subtract pre-tax salary sacrifice (cycle scheme, EV lease, etc.)
- This gives taxable income
- Apply Personal Allowance (£12,570 for 2026/27, tapered above £100k adjusted net income)
- Calculate income tax using the applicable band structure (UK or Scottish)
- Calculate National Insurance on gross (not taxable) income, above the £12,570 threshold
- Calculate student loan repayment if applicable, based on the plan threshold and 9% (or 6% for postgrad)
- This gives annual net take-home
- Subtract post-tax household deductions (mortgage, council tax, utilities, etc.)
- This gives disposable income
2. Income Tax — UK (England, Wales, Northern Ireland)
2026/27 thresholds
| Band | Rate | Range (gross) |
|---|---|---|
| Personal Allowance | 0% | £0 – £12,570 |
| Basic rate | 20% | £12,571 – £50,270 |
| Higher rate | 40% | £50,271 – £125,140 |
| Additional rate | 45% | £125,141+ |
Personal Allowance taper
If your adjusted net income exceeds £100,000, your Personal Allowance is reduced by £1 for every £2 of income above £100,000. At £125,140 it is fully tapered (zero).
The basic-rate band is a fixed £37,700 wide regardless of PA. When PA tapers, what shifts is the higher-rate threshold (PA + £37,700), not the basic-rate width. Earlier versions of common UK tax calculators got this wrong by computing the BR width as basicRateLimit − PA, which under-states tax for high earners. We use the correct formula.
Example: £130,000 salary, 8% pension
- Pension reduction: £130,000 × 8% = £10,400 → taxable income £119,600
- Adjusted Net Income for PA taper: £119,600 (still above £100k)
- PA taper: max(0, 12,570 − (119,600 − 100,000) / 2) = max(0, 12,570 − 9,800) = £2,770
- Higher-rate threshold = £2,770 + £37,700 = £40,470
- Income subject to BR (20%): £40,470 − £2,770 = £37,700 → tax £7,540
- Income subject to HR (40%): £119,600 − £40,470 = £79,130 → tax £31,652
- Total income tax: £39,192
3. Income Tax — Scotland
Scottish income tax has six bands and applies to non-savings, non-dividend income for Scottish taxpayers.
| Band | Rate | Range (taxable income above PA) |
|---|---|---|
| Starter | 19% | £0 – £2,827 |
| Basic | 20% | £2,828 – £14,921 |
| Intermediate | 21% | £14,922 – £31,092 |
| Higher | 42% | £31,093 – £62,430 |
| Advanced | 45% | £62,431 – £112,570 |
| Top | 48% | £112,571+ |
The Personal Allowance taper rule (above £100,000 ANI) applies in Scotland too.
4. National Insurance (Class 1)
National Insurance is charged on gross earnings, not taxable income — pension contributions (unless via salary sacrifice) don't reduce NI.
| Band | Rate | Annual earnings |
|---|---|---|
| Below Primary Threshold | 0% | £0 – £12,570 |
| Main rate | 8% | £12,571 – £50,270 |
| Upper rate | 2% | £50,271+ |
Note: NI is calculated annually for simplicity in this calculator. Your real payslip shows NI on a weekly or monthly basis using the £242/week (£1,048/month) threshold. The annualised figure matches if your earnings are consistent across the year; it diverges if you have a one-off bonus or change jobs mid-year.
5. Pension Contributions
The calculator supports pre-tax (relief-at-source or net pay) and salary sacrifice pension contributions:
- Net pay arrangement (most employer schemes): contribution is taken before tax is calculated. Reduces taxable income (and so reduces tax) but NOT NI-able income. Tax relief is automatic.
- Salary sacrifice: contribution is taken from gross salary before tax AND before NI. Reduces both. Higher employer/employee NI saving but means a lower notional salary for mortgage applications and statutory benefits.
- Relief at source (some personal pensions): contribution is taken from net pay; the provider claims back 20% basic-rate tax from HMRC. Higher-rate / additional-rate taxpayers must claim the additional relief separately via Self Assessment.
6. Student Loan Repayments
| Plan | Threshold (2026/27) | Rate |
|---|---|---|
| Plan 1 | £26,065 | 9% above threshold |
| Plan 2 | £28,470 | 9% above threshold |
| Plan 4 (Scotland) | £31,395 | 9% above threshold |
| Plan 5 (post-Aug 2023) | £25,000 | 9% above threshold |
| Postgraduate | £21,000 | 6% above threshold |
Repayments are calculated on gross earnings before pension, the same basis as NI. You can have multiple loan plans active (e.g. Plan 2 + Postgraduate) — the calculator handles each independently.
7. Mortgage Borrowing Capacity
The illustrative mortgage figure uses a 4.0× to 4.5× annual gross income range — the typical loan-to-income ratio UK lenders use following the 2014 Mortgage Market Review (MMR). Some lenders cap at 4.0×; others stretch to 4.5× or 5× for higher earners or smaller deposits.
This is not a loan offer or pre-approval. Actual mortgage decisions depend on:
- Credit history and score
- Deposit size (and loan-to-value ratio)
- Existing debts, credit card balances, other commitments
- Affordability stress tests at higher hypothetical interest rates
- Current Bank of England base rate and lender appetite
- Property type (new-build, leasehold, etc.)
8. UK Median Comparison
When the calculator shows "X% above/below UK median full-time gross", it uses the most recent Office for National Statistics figure: £39,039, the median annual gross earnings for full-time UK employees in April 2025.
9. Known Limitations
The calculator does not currently model:
- Marriage Allowance transfer (£1,260 PA transfer between spouses)
- Blind Person's Allowance (£3,070 additional PA in 2026/27)
- K-prefix tax codes (negative PA where employer benefits exceed PA)
- Payrolled benefits in kind (the calculator assumes BIK is handled via tax code adjustment, not payroll)
- Multiple PAYE jobs in the same tax year
- Self-employed income / Class 2 or Class 4 NI
- Dividend income or savings income (different bands apply)
- Capital gains
For these situations, your real net pay will diverge from our estimate. For binding figures, use your HMRC Personal Tax Account or consult an accountant.
10. Testing & Verification
The calculation engine is verified against:
- HMRC's own Estimate your Income Tax tool — figures match to the £
- Known reference scenarios: a Band 5 NHS entry-level nurse with 8.3% pension produces the same net as published in our NHS-specific calculator (nhstakehome.co.uk)
- The £130,000 PA-taper edge case (returns ~£75,800 net, matching independent calculations)
- Scottish higher-rate examples crossing the £43,663 threshold
If you find a discrepancy with your payslip, please contact us with your inputs and the difference. We treat data inaccuracies as priority bugs.