Understanding income tax
UK income tax uses progressive tax bands for the selected tax year: 0% on income up to £12,570 (personal allowance), 20% basic rate on £12,571-£50,270, 40% higher rate on £50,271-£125,140, and 45% additional rate on income above £125,140. Tax is calculated on your taxable income after deducting your personal allowance and other reliefs.
The personal allowance (£12,570 for the selected tax year) is the amount you can earn tax-free each year. However, if you earn over £100,000, your personal allowance is reduced by £1 for every £2 over this threshold, disappearing entirely at £125,140. This creates an effective tax rate of 60% on income between £100,000-£125,140.
This estimate treats the pension field as salary sacrifice or another deduction made before Income Tax and employee National Insurance. Relief-at-source and net-pay pension arrangements work differently, so check the method shown on your workplace pension documents and payslip.
For 2026/27, Plan 2 student loan repayments are 9% of income above £29,385. Employee National Insurance is estimated annually at 8% between £12,570 and £50,270, then 2% above that. Payroll works by pay period, so bonuses, irregular pay and tax codes can make actual deductions differ.
Example scenario
Employed professional
Practical calculator guidance
What the salary estimate includes
Use gross annual employment income rather than take-home pay. The result applies the selected tax-year assumptions to salary and the options provided on the page. It is a planning comparison, not a payroll reproduction, and a payslip can differ because employers apply tax codes and deductions cumulatively or by pay period.
Tax codes and payroll timing matter
A standard calculator generally assumes normal allowances, while an employer uses the tax code supplied through PAYE. Benefits, earlier underpayments, multiple jobs, a week-one or month-one basis and a mid-year job change can alter deductions. Bonuses and overtime can also make one payslip look unusually high or low. Compare annual totals and review the tax code before treating a difference as an error.
Pensions and student loans use different rules
Workplace pension arrangements can operate through salary sacrifice, net pay or relief at source, and those methods do not affect taxable pay identically. Student and postgraduate loan deductions use plan-specific thresholds and payroll rules. Select the closest available options, but use the employer’s scheme information and official loan-plan details when checking a real payslip.
Use a different tool for untaxed income
This page is focused on employment income. Freelancing, property profit, dividends, savings and other untaxed amounts can change the overall position and may require Self Assessment. Do not add business turnover to salary as though it were wages: calculate the relevant profit first and use the sole-trader, side-hustle, landlord or dividend tool for that income source.
Worked example
A worker compares a £42,000 offer with their expected monthly budget. They enter the annual gross salary, confirm their student-loan plan and check how the workplace pension is operated. The estimate provides an annual and monthly planning figure. Their first payslip may still differ because of the actual tax code, pension method, start date or a one-off payment, so they retain the offer and payslip before raising a payroll query.
How this guidance is reviewed
Author
Written and maintained by UK Tax Toolbox, led by founder Conor Dwyer. Calculator assumptions are checked against the public sources linked on the page.
Last reviewed
12 August 2026
Basis of guidance
Public HMRC and GOV.UK guidance, published tax thresholds and the calculator assumptions stated on each page.
Useful official references
Spot something that looks out of date? Use the contact page to flag corrections. Important tax decisions should still be checked with HMRC or a qualified adviser.