Every UK payslip hides the same three-step calculation. Once you can see it, you can predict your take-home pay for any salary — and spot payroll errors instantly.
Step 1: The Personal Allowance
Your first £12,570 is tax-free. It does not matter whether you earn £15,000 or £95,000 — that slice costs you nothing in income tax. (Above £100,000 the allowance shrinks by £1 for every £2, creating an infamous 60% effective rate between £100,000 and £125,140.)
Step 2: The Tax Bands
Only income above the allowance is taxed, in slices: 20% basic rate up to £50,270, 40% higher rate up to £125,140, 45% above. Crucially, moving into a higher band only taxes the income in that band — a pay rise can never leave you worse off through income tax alone.
Step 3: National Insurance
NI is the quiet second tax: 8% on earnings between £12,570 and £50,270 and 2% above. It is calculated per pay period rather than annually, which is why a bonus month can feel disproportionately taxed.
A Worked Example — £35,000
- Income tax: (£35,000 − £12,570) × 20% = £4,486
- National Insurance: (£35,000 − £12,570) × 8% = £1,794
- Take-home: £28,720 — about £2,393/month
Scottish taxpayers use different bands and rates — six of them — which change the answer by a few hundred pounds either way.