Why you don’t keep all of a pay rise
Each extra pound you earn has tax, National Insurance and often pension and student loan taken off. How much you keep depends on where your pay sits (2026/27, England, Wales and Northern Ireland):
| £12,570 to £50,270 | About 72p of each extra £1, after 20% tax and 8% National Insurance |
|---|---|
| £50,270 to £100,000 | About 58p, after 40% tax and 2% National Insurance |
| £100,000 to £125,140 | About 38p, because you also lose your tax-free allowance |
| Over £125,140 | About 53p, after 45% tax and 2% National Insurance |
These are before pension and student loan, which take a little more but your pension is still your money.
Lines to watch
- £50,270: income tax goes up to 40%.
- £60,000: if you or your partner get Child Benefit, you start paying it back. By £80,000 you pay it all back.
- £100,000: you start losing your £12,570 tax-free allowance, and you lose free childcare hours and Tax-Free Childcare.
Paying more into your pension lowers the income these lines are measured on, which is why a pension can be the best home for part of a rise.
Comparing two jobs
- Employer pension: 3% compared with 8% on a £50,000 salary is £2,500 a year of your money.
- Travel: a longer commute can eat a big part of a rise. Add it under More options.
- Bonus: only count it if you’re confident you’ll get it.
Earning more and not sure what to do with it?
A financial adviser can help you use pension payments and allowances so less of your rise goes in tax.
Find a financial adviserWorked example
Jo earns £40,000 and is offered £45,000, a 12.5% rise. She pays 5% into her pension.
| Pay rise before tax | £5,000 a year |
|---|---|
| Extra take-home pay | £3,400 a year, about £283 a month |
| Take-home goes up by | 11.1% |
| She keeps of each extra £1 | 68p |
Another £250 a year goes into her pension, which is still her money.
Questions
Will my first payslip be right?
Not always. After a pay change or a new job your tax code can take a month or two to catch up, so check your first payslips. Most people’s tax code is 1257L.
Does a pay rise push all my pay into a higher tax band?
No. Only the part above each line is taxed at the higher rate. Your pay below the line is taxed the same as before.
What does this calculator leave out?
Scottish tax rates, benefits such as Universal Credit, salary sacrifice for things other than pensions, and company cars. It’s a guide, not financial advice.