Your salary and your take-home pay can differ by thousands of pounds. Here's exactly what gets deducted and why.
At a £35,000 salary in 2025/26, you don't take home £35,000. After income tax and National Insurance, you're closer to £27,500. That £7,500 gap surprises more people than it should, and understanding where every pound goes is the first step to managing your money properly.
Gross pay is the headline number on your contract. Take-home pay, sometimes called net income, is what survives the deductions queue. That queue typically has three compulsory passengers and a couple of optional ones.
Compulsory deductions:
Voluntary or employer-mandated deductions:
The order matters. Pension contributions paid through salary sacrifice come off before tax is calculated, which is why they reduce your take-home pay by less than the nominal percentage suggests.
Here are the thresholds and rates that shape most people's take-home pay in 2025/26:
| Earnings band | Income tax rate | Employee NI rate |
|---|---|---|
| Up to £12,570 | 0% (Personal Allowance) | 0% |
| £12,571 to £50,270 | 20% (basic rate) | 8% |
| £50,271 to £125,140 | 40% (higher rate) | 2% |
| Over £125,140 | 45% (additional rate) | 2% |
Note that the Personal Allowance tapers to zero for those earning over £100,000, at a rate of £1 of allowance lost for every £2 of income above that threshold. This creates an effective 60% marginal tax rate between £100,000 and £125,140.
Let's make this concrete. A sole employee earning £35,000 gross with a standard 1257L tax code, no student loan, and paying the minimum 5% pension contribution.
Gross salary: £35,000
Pension contribution (5%): £1,750 (reduces taxable pay to £33,250)
Income tax:
Employee National Insurance (on full £35,000, before salary sacrifice pension):
Total deductions: £1,750 (pension) + £4,136 (tax) + £1,794 (NI) = £7,680
Take-home pay: £35,000 minus £7,680 = £27,320 per year, or roughly £2,277 per month
You can run your own numbers instantly using the TapTax salary take-home calculator.
The number your employer uses to deduct income tax is not plucked from thin air. It comes from your tax code, which HMRC issues based on your circumstances. The standard code for 2025/26 is 1257L, reflecting the £12,570 Personal Allowance.
If your tax code is wrong, your employer deducts too much or too little tax every single payslip. An emergency tax code (such as 1257L W1/M1 or BR) can slash your take-home pay significantly because it ignores your accumulated allowance for the year.
If your monthly take-home pay dropped without explanation, a wrong tax code is the most common culprit. Check your tax code as soon as you spot a discrepancy; HMRC will issue a repayment if you've overpaid.
For sole traders and the self-employed, there is no employer deducting tax at source. You receive gross income in full, then pay income tax and Class 4 National Insurance through Self Assessment after the tax year ends.
This means your "take-home pay" throughout the year is the full amount you invoice or earn, less your business expenses. The tax bill arrives later, typically by 31 January following the tax year end. Many self-employed people are caught out by spending money they should have reserved for that bill.
Class 4 NI for the self-employed runs at 6% on profits between £12,570 and £50,270, and 2% above that in 2025/26. Class 2 NI was effectively abolished from April 2024, with Class 4 now providing access to contributory benefits.
After business expenses, suppose your taxable profit is £42,000. Your income tax liability would be roughly £5,886 (20% on £29,430 above the Personal Allowance). Class 4 NI on £29,430 at 6% adds another £1,766. So your effective take-home is around £34,348, not £42,000. Setting aside roughly 30% of every invoice for tax is a sound rule of thumb at this income level.
Take-home pay is not entirely fixed. Several actions can increase the amount that actually reaches your account:
Your salary is the promise; your take-home pay is the reality. The gap is predictable, and knowing the maths means no nasty surprises.
TapTax connects to your bank, categorises expenses automatically, and submits quarterly updates to HMRC. Free plan, no card required.
