Your gross salary is what your employer agrees to pay; your net salary (take-home pay) is what lands in your bank account. The difference is made up of income tax, social security contributions and, often, pension and loan repayments. Because tax systems are progressive, you cannot simply apply one percentage to your whole salary. This guide walks through the UK and US calculations for 2026 step by step.
General information only. Tax rules depend on personal circumstances; check GOV.UK, HMRC, the IRS or a qualified adviser.
The general formula
Net pay = gross pay − income tax − social security contributions − other deductions
Other deductions may include workplace pension contributions, student loan repayments, union fees or health insurance premiums. Some (such as many pension contributions) are taken before tax and so reduce your tax bill.
UK: income tax and National Insurance (2026/27)
The UK tax year runs from 6 April 2026 to 5 April 2027. Employers deduct tax and National Insurance through PAYE (Pay As You Earn).
Income tax bands (England, Wales, Northern Ireland)
| Band | Taxable income | Rate |
|---|---|---|
| Personal allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 – £50,270 | 20% |
| Higher rate | £50,271 – £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
The personal allowance falls by £1 for every £2 earned over £100,000, which creates an effective 60% marginal rate between £100,000 and £125,140. Scotland has its own six bands (19%, 20%, 21%, 42%, 45% and 48%), so Scottish taxpayers pay slightly different amounts.
Employee National Insurance (Class 1)
| Earnings per year | Rate |
|---|---|
| Up to £12,570 | 0% |
| £12,570 – £50,270 | 8% |
| Over £50,270 | 2% |
Employers pay their own National Insurance on top (15% above £5,000 a year), which does not come out of your salary but affects what hiring you costs.
Worked example: £35,000 salary
- Taxable income: 35,000 − 12,570 = £22,430
- Income tax: 22,430 × 20% = £4,486
- National Insurance: (35,000 − 12,570) × 8% = £1,794.40
- Net pay: 35,000 − 4,486 − 1,794.40 = £28,719.60 a year, or about £2,393 a month
Worked example: £60,000 salary
- Income tax: basic rate band 37,700 × 20% = £7,540; higher rate (60,000 − 50,270) × 40% = £3,892. Total £11,432.
- National Insurance: 37,700 × 8% = £3,016; (60,000 − 50,270) × 2% = £194.60. Total £3,210.60.
- Net pay: 60,000 − 11,432 − 3,210.60 = £45,357.40 a year (about £3,780 a month).
Pension and student loan deductions
- Auto-enrolment pension: most employees are enrolled in a workplace pension. The legal minimum is 8% of “qualifying earnings” (between £6,240 and £50,270 in 2026/27), of which at least 3% comes from the employer and typically 5% from you. On £35,000 that is 5% × (35,000 − 6,240) = £1,438 a year from you, though tax relief reduces the real cost.
- Student loans are repaid at 9% (Plans 1, 2, 4 and 5) or 6% (postgraduate) of income above the threshold for your plan.
Tax codes
Most employees have the tax code 1257L, meaning a £12,570 allowance. A code ending in “W1”, “M1” or “X” is an emergency code, and “BR” taxes everything at 20%. If your code looks wrong, contact HMRC; overpaid tax is usually refunded through payroll.
US: federal tax, FICA and state tax (2026)
US payroll deductions come in layers.
Federal income tax brackets 2026 (single filer)
| Taxable income | Rate |
|---|---|
| $0 – $12,400 | 10% |
| $12,401 – $50,400 | 12% |
| $50,401 – $105,700 | 22% |
| $105,701 – $201,775 | 24% |
| $201,776 – $256,225 | 32% |
| $256,226 – $640,600 | 35% |
| Over $640,600 | 37% |
The standard deduction for 2026 is $16,100 for single filers ($32,200 for married couples filing jointly). Taxable income is gross income minus the standard (or itemised) deduction and pre-tax contributions.
FICA
- Social Security: 6.2% on wages up to $184,500 in 2026.
- Medicare: 1.45% on all wages, plus an extra 0.9% on wages above $200,000 (single).
State and local taxes
Most states levy income tax, either flat (e.g. around 3–5%) or progressive (California’s top rate is over 13%). Nine states have no tax on wages, including Texas, Florida, Washington, Nevada and Tennessee. Some cities, such as New York City, add a local income tax.
Worked example: $60,000 in Texas (single, no pre-tax deductions)
- Taxable income: 60,000 − 16,100 = $43,900
- Federal income tax: 12,400 × 10% = $1,240; (43,900 − 12,400) × 12% = $3,780. Total $5,020.
- Social Security: 60,000 × 6.2% = $3,720
- Medicare: 60,000 × 1.45% = $870
- State tax: $0 in Texas
- Net pay: 60,000 − 5,020 − 3,720 − 870 = $50,390 a year, about $4,199 a month.
A 401(k) contribution of 5% ($3,000) would cut taxable income to $40,900 and federal tax by $360, so take-home falls by only $2,640.
Marginal vs effective tax rate
In the £60,000 UK example, your marginal rate (tax plus NI on the next pound) is 42%, but your effective rate is (11,432 + 3,210.60) ÷ 60,000 = 24.4%. A pay rise never reduces your take-home pay overall, because higher rates apply only to the income above each threshold. The exception is the UK personal allowance taper, which makes the band from £100,000 to £125,140 very expensive.
Other countries in brief
- Türkiye: employees pay 14% social security and 1% unemployment insurance, then progressive income tax and stamp duty, with minimum-wage exemptions. Our Turkey salary calculator does the full calculation.
- Germany: income tax (Lohnsteuer) plus roughly 20% social insurance shared with the employer.
- Saudi Arabia and the UAE: no personal income tax; Saudi nationals contribute to GOSI.
Checklist
- Know whether a quoted salary is gross or net, and annual or monthly.
- Apply tax bands progressively, not one rate to the whole amount.
- Add social contributions (NI or FICA) separately.
- Deduct pension, student loan and other payroll items.
- In the UK, check your tax code; in the US, review your W-4.
For how your pay compares with the legal floor, see our minimum wage guide. For percentage maths, see how to calculate percentages.