How take-home pay is calculated
Take-home pay — sometimes called net pay — is what remains of your gross salary after the statutory and chosen deductions taken at source through PAYE. The calculation runs in roughly this order:
First, any salary sacrifice pension contribution is removed from your gross pay — this is treated as never having been yours for tax and NI purposes. The resulting amount is your taxable gross. Income tax is then calculated band by band using your personal allowance (usually £12,570), basic rate (20% between £12,571 and £50,270), higher rate (40%) and additional rate (45%). National Insurance is calculated separately on the same taxable gross: 0% below £12,570, 8% up to £50,270, and 2% above.
If you're repaying a student loan, 9% (or 6% for Postgraduate) of your earnings above the plan threshold is also deducted. Finally, any relief-at-source pension contribution is taken from your net pay — the provider adds 20% basic-rate relief to whatever you pay in, and higher-rate taxpayers claim the extra via self-assessment. What's left after all of this is your take-home pay.
Student loan repayment rates
| Plan | Annual threshold | Rate on income above threshold |
|---|---|---|
| Plan 1 | £24,990 | 9% |
| Plan 2 | £27,295 | 9% |
| Plan 4 (Scotland) | £31,395 | 9% |
| Plan 5 | £25,000 | 9% |
| Postgraduate | £21,000 | 6% |
How pension contributions affect your take-home
The mechanism matters more than the amount. With salary sacrifice, your contribution is invisible to income tax and NI — so a £100 sacrifice from gross pay only reduces your take-home by around £68 (a basic-rate taxpayer) or £58 (a higher-rate taxpayer). With relief at source, you pay the same £100 from net pay, so your take-home drops by the full £100 — but the provider grosses up the contribution to £125 in your pension pot (basic-rate relief); a higher-rate taxpayer claims a further £25 back through self-assessment.
Over time, salary sacrifice is usually the more efficient option because NI savings are never recovered by relief at source. Check whether your employer shares their NI saving too — some pass the 15% onto your pension, which effectively boosts the contribution even further.