Work out your take-home pay
Income tax, National Insurance and net pay for any UK salary, 2026-27.
Gross pay is the amount an employee is due to receive before any deductions are made, the definition HMRC uses in its employer guide CWG2 [1]. A worker aged 21 or over on the National Living Wage of £12.71 an hour earns a gross figure that never matches what reaches their bank account [2].
The gap between the two numbers confuses employees and exposes employers. Every UK payslip must show gross pay by law, and every PAYE calculation, National Insurance band and pension assessment starts from it [3]. An employer that measures the wrong figure against the wrong threshold underpays tax or breaches minimum wage rules.
You can verify any hourly rate against the legal floor with our free minimum wage calculator.
This article defines gross pay precisely, separates it from net pay and taxable pay, lists the deductions that sit between them, and explains why the gross figure is the anchor of every payroll compliance check.
Key takeaways
- Gross pay is the total amount due to an employee before any deductions, as defined in HMRC's CWG2 employer guide.
- Gross pay includes basic wages, overtime, bonuses, commission and statutory payments such as sick pay and maternity pay.
- Net pay is what remains after income tax, National Insurance, pension contributions, student loan repayments and any other deductions.
- Employers must show gross pay on every payslip, a legal requirement that covers all workers, not just employees.
- Minimum wage compliance, PAYE thresholds and auto-enrolment assessments are all tested against pay before deductions, so an incorrect gross figure cascades into every other calculation.
What gross pay means
Gross pay is the starting point of every payroll calculation. HMRC defines it as the amount the employee is due to receive before any deductions are made [1]. For a salaried employee, the gross figure is the annual salary divided across the pay periods. For hourly, piece-rate or commission-based workers, it is the total earned in the pay reference period.
What counts as gross pay
Gross pay covers more than basic salary. Overtime, bonuses, commission, holiday pay and arrears of pay all form part of the gross figure [4]. Statutory payments are included too: Statutory Sick Pay, Statutory Maternity Pay and the other family-related payments are paid through the payroll and taxed as earnings [1].
Tips handled through the payroll under the Employment (Allocation of Tips) Act 2023 are also earnings for tax purposes, although they can never count towards minimum wage pay [5].
What sits outside gross pay
Genuine business expense reimbursements are not earnings. An employee who pays for a train ticket and claims it back receives a repayment, not pay [1]. Employer pension contributions sit outside gross pay as well: the employer's 3% or more under auto-enrolment is paid into the scheme, never through the payslip's gross line [6]. Most benefits in kind, such as a company car or private medical insurance, are taxed separately through a P11D or payrolling arrangement rather than added to cash gross pay [7].
Gross pay vs net pay
Net pay is what remains once every deduction has been taken. The two figures bracket the payslip: gross at the top, net at the bottom [3]. The table below summarises the distinction.
| Figure | Definition | Where it appears |
|---|---|---|
| Gross pay | Total due before any deductions | Top of the payslip |
| Taxable pay | Gross pay minus pre-tax items such as certain pension contributions | PAYE calculation |
| Net pay | Amount actually paid after all deductions | Bottom of the payslip |
Taxable pay deserves attention because it often differs from gross pay. Pension contributions taken under a net pay arrangement reduce taxable pay before income tax is calculated, so the figure HMRC taxes can be lower than the headline gross [7]. A fuller breakdown of the bottom-line figure is covered in Moonworkers' guide to what net pay means.
The deductions between gross and net
Deductions fall into two groups: those required by law and those the employee has agreed to [8]. The table below shows the statutory deductions for the 2026-27 tax year.
| Deduction | Rate | Applies to earnings above |
|---|---|---|
| Income tax (basic rate, England and NI) | 20% | £12,570 Personal Allowance [[9]](https://www.gov.uk/income-tax-rates) |
| Employee National Insurance (main rate) | 8% | £12,570 a year [[10]](https://www.gov.uk/national-insurance-rates-letters) |
| Employee National Insurance (upper rate) | 2% | £50,270 a year [[10]](https://www.gov.uk/national-insurance-rates-letters) |
| Student loan (Plan 2) | 9% | £29,385 a year [[11]](https://www.gov.uk/repaying-your-student-loan/what-you-pay) |
Statutory deductions
Income tax under PAYE and employee National Insurance are deducted automatically by the employer on every payday [9]. Student loan repayments join them where HMRC has issued a start notice, at 9% of earnings above the plan threshold [11]. HMRC caps any single PAYE deduction at 50% of gross pay, a protection that applies regardless of tax code [1].
Voluntary and court-ordered deductions
Pension contributions under auto-enrolment, union subscriptions and season-ticket loan repayments are taken with the employee's agreement [8]. Court orders, such as attachment of earnings, can compel a deduction without consent [12]. In retail, an employer recovering till shortfalls cannot take more than 10% of gross pay in any pay period [8].
Why gross pay matters for employers
Every payroll compliance test is anchored to pay before deductions. Minimum wage compliance compares gross pay (with specific exclusions such as tip income and overtime premiums) against the worker's hours in the pay reference period [5]. Employer National Insurance at 15% is charged on gross earnings above the £5,000 Secondary Threshold [10], a calculation explained in Moonworkers' guide to how National Insurance is calculated.
Salary sacrifice complicates the picture. An employee who exchanges salary for a non-cash benefit reduces their contractual gross pay, which lowers tax and National Insurance for both parties [13]. The arrangement must never push cash earnings below the minimum wage, so employers running sacrifice schemes need a check on every payrun [13]. The full set of PAYE bands that gross pay is measured against is set out in Moonworkers' PAYE thresholds guide.
HMRC-recognised UK payroll software calculates gross pay, applies each deduction in the correct order and itemises the result on a compliant payslip automatically. For employers who need a single compliant document rather than a full payroll, an instant payslip generator produces the same gross-to-net breakdown on demand.
Turn a gross figure into take-home pay
To see what a gross salary becomes after deductions, the Moonworkers gross to net calculator applies the 2026-27 PAYE and National Insurance rules and returns the net pay, along with the employer National Insurance the gross figure attracts.
£ per month
e.g. 1257L, S1257L, BR, D0
S = Scotland · C = Wales · W1/M1 = non-cumulative
Enter a salary or hourly rate above
About this calculator
This calculator gives you a close estimate of your UK payroll deductions for 2026-27, using HMRC's exact percentage method. It covers the vast majority of employees on standard tax codes, but it won't match your payslip to the penny in every case. Edge cases it does not cover include in-year tax code changes, K-code carry-forwards, Week 53 adjustments, payrolled benefits in kind, and multi-employment NI deferral. Powered by the same engine as the Moonworkers Payroll API.
Frequently asked questions
Why might the result differ from my payslip?
This calculator uses your current gross pay and tax code to produce an estimate. Your employer may apply adjustments not covered here, such as mid-year tax code changes, K-code carry-forwards, or benefits in kind processed through payroll. For most employees on a standard tax code these differences are negligible.
What tax code should I enter?
Use the tax code shown on your most recent payslip or the PAYE Coding Notice (P2) from HMRC. If you're not sure, 1257L is the standard code for most employees resident in England, Wales, or Northern Ireland. Use S1257L for Scotland or C1257L for Wales if you pay Scottish or Welsh income tax.
Which NI category applies to me?
Most employees use Category A. Use M if you are under 21, H if you are an apprentice under 25, or C if you are over State Pension age. Your employer is responsible for assigning the correct category — if in doubt, check your payslip.
Which student loan plan am I on?
Your plan depends on when and where you studied. Plan 1 covers students who started before September 2012. Plan 2 is for English and Welsh students who started from September 2012 to July 2023. Plan 5 applies to English students who started from August 2023. Plan 4 covers Scottish students. You can check your plan at gov.uk or on your payslip.
What is the YTD cumulative PAYE mode?
HMRC's standard method calculates income tax on your total earnings to date each period, then subtracts tax already paid. If you're mid-year and want to see exactly what tax should be deducted in a specific period, expand the Year-to-date section and enter your running totals from previous periods only.
Conclusion
Gross pay looks like the simplest line on the payslip, yet it carries the whole compliance load. It is the figure the law requires on every itemised pay statement, the base for PAYE and National Insurance, the reference for minimum wage testing and the input for pension assessment. When the gross figure is right, every downstream calculation can be right; when it is wrong, every one of them inherits the error.
As payroll automation spreads, the gross-to-net journey is increasingly calculated, validated and filed by software rather than by hand. The employers best placed for that shift are those who understand exactly what their gross figure contains, because the quality of every automated payrun still depends on the quality of the pay data going in.
Frequently asked questions
Is gross pay before or after pension contributions?
Gross pay is calculated before employee pension contributions are deducted. However, the method matters: under a net pay arrangement the contribution reduces taxable pay before income tax is worked out, while under relief at source it is taken from pay after tax and the scheme reclaims basic-rate relief. Under salary sacrifice, the contribution reduces contractual gross pay itself.
Does gross pay include employer National Insurance?
No. Employer National Insurance is a cost the employer pays on top of gross pay, at 15% on earnings above £5,000 a year for the 2026-27 tax year. It never appears as part of the employee's gross figure, although some payslips show it separately for information.
Why is taxable pay lower than gross pay on a payslip?
Taxable pay is gross pay minus items that are exempt from income tax, most commonly pension contributions taken under a net pay arrangement. An employee contributing 5% of salary to a workplace pension through net pay will see taxable pay roughly 5% below gross pay, which is correct rather than an error.
What gross pay figure do mortgage lenders use?
Lenders typically ask for annual gross pay evidenced by recent payslips and a P60, the year-end certificate that states total pay and tax for the tax year. Regular overtime, bonuses and commission may be counted in full or in part depending on the lender's criteria, which is why the itemised breakdown on the payslip matters.
