How Payroll Deductions Work in the UK
Understand what comes out of your pay: income tax, National Insurance, pension, and student loan deductions explained.
What is deducted from your pay?
UK payroll deductions typically include:
- Income tax — based on your tax code and earnings above your personal allowance (£12,570)
- Employee National Insurance — 8% on earnings between £12,570 and £50,270, then 2% above
- Pension contributions — usually 5% under auto-enrolment (minimum 3% employee + 3% employer)
- Student loan repayments — 9% above the plan threshold (Plan 2: £28,470)
Gross pay vs net pay
Gross pay is your total salary before any deductions. Net pay (take-home pay) is what you actually receive in your bank account after all deductions.
What does your employer pay on top?
Beyond your gross salary, your employer also pays:
- Employer’s NI: 13.8% on earnings above £5,000
- Employer’s pension contribution: minimum 3% under auto-enrolment
- Apprenticeship levy: 0.5% for employers with a pay bill over £3 million
For a £35,000 salary, the total employer cost is typically £39,000–£40,000.
Worked example
£35,000 salary with 5% pension: After £1,750 pension, £4,136 tax, and £1,794 NI, your take-home is approximately £27,320/year (£2,277/month).
Try the calculator
Use our Payroll Calculator to estimate your deductions and net pay.
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Related calculators
- Payroll Calculator — Your net pay = Gross salary minus income tax, National Insurance, pension, and student loan deductions. Employer cost = Gross salary plus em
- Take-Home Pay Calculator — Enter your salary to see a breakdown of income tax, National Insurance, pension contributions, and student loan repayments — and what you ac
- Day Rate Calculator — Enter your annual salary, hourly rate, or target income to calculate your equivalent day rate — or convert a day rate back to an annual figu
- Overtime Calculator — Enter your base rate, overtime hours, and multiplier to see your gross overtime pay — and optionally estimate the tax and NI on your extra e
- Holiday Entitlement Calculator — Full-time UK workers are entitled to at least 28 days (5.6 weeks) of paid holiday per year including bank holidays. Part-time and irregular
- Holiday Accrual Calculator — Enter your annual entitlement and leave year dates to see how many days you have accrued so far and how many remain.
Related guides
- How Holiday Accrual Is Calculated in the UK — Learn how holiday builds up over a leave year and how to check how much you have accrued so far.
- How Holiday Entitlement Works in the UK — A practical guide to understanding your statutory holiday entitlement as a UK worker, covering full-time, part-time, and irregular working patterns.
- How Overtime Pay Works in the UK — Understand your overtime pay rights, how it is taxed, and how different multipliers affect your earnings.
- How to Calculate Your Freelance Day Rate — A practical guide to setting your day rate as a freelancer or contractor, including salary equivalence and market benchmarks.
- Inside IR35 Explained: What UK Contractors Need to Know — A clear guide to working inside IR35, how it affects your take-home pay, and what it means for your contract.
- Outside IR35 Explained for UK Contractors — What outside IR35 means, how it affects your take-home pay, and the key differences between inside and outside IR35.
Last updated
Last reviewed: 2026-04-12T13:47:06.590Z.