Your take-home pay, also known as net pay or net salary, is the amount you receive each month after any deductions which have to be made. In other words, it’s the actual amount of money you have available for things like a mortgage or rent, energy bills, weekly groceries, hobbies and putting aside into savings accounts.
We get a lot of people asking us how they can calculate their take-home pay, so we’re in the process of having a take-home pay calculator created for our website. In the meantime, here’s how to do it manually.
To calculate your take-home pay or net salary, you can follow this manual calculation process:
Determine your gross salary: Start with your gross salary, which is your total income before any deductions. This includes your base salary, bonuses, overtime pay, and other taxable earnings.
Consider your tax code: Your tax code determines the amount of income you can earn before paying income tax. The most common tax code for the 2023/2024 tax year is 1257L, which means you can earn £12,570 before paying income tax. Make sure to check your tax code on your payslip or P45/P60.
Calculate income tax: Use the income tax bands and rates for this tax year to calculate your income tax liability (please see section below). Apply the tax rates to the portions of your income within each band to determine your total income tax.
Calculate National Insurance contributions: NIC is another deduction from your gross income. The rates and thresholds for NIC also vary according to your employment status and earnings. You can find the latest Employee National Insurance rates on the gov.uk website.
Take away other deductions and contributions: Consider any other deductions that apply to your situation, such as pension contributions, student loan repayments, and so on. Subtract these amounts from your gross salary.
Deduct any allowable expenses: Some expenses may be deductible for tax purposes, such as certain work-related expenses. Get in touch with our tax planning experts to determine whether you have any eligible deductions.
Calculate employer contributions: Keep in mind that your employer may also contribute toward National Insurance, pension schemes, and other workplace benefits. Add any employer contributions to your net salary calculation.
Subtract all deductions: Subtract the income tax, National Insurance contributions, other deductions, and allowable expenses from your gross salary to arrive at your net salary (take-home pay).
Please note: This is a general overview and individual circumstances can vary. For accurate and personalised calculations, get in touch with our tax professionals so that we can consider all relevant factors specific to your situation. Additionally, tax regulations and thresholds can change from year to year, so it's crucial to stay updated with the latest information from HMRC.
Personal allowance (taxable income up to £12,570), tax rate = 0%
Basic rate (taxable income between £12,571 and £50,270), tax rate = 20%
Higher rate (taxable income between £50,271 and £125,140), tax rate = 40%
Additional rate (taxable income over £125,140), tax rate = 45%
If you need help calculating your salary and confirming your tax information, call our Northern office on 01482 235 575, our London office on 0207 885 0605 or fill in our contact form.
