Your gross salary is the number on the contract. Your net pay is what lands in your bank. The gap between them — income tax, National Insurance, pension, student loan — can be 30% or more. Here's exactly what disappears, and why.
The simple definitions
Gross income is your total income before any deductions. For an employee, it's your salary before tax and National Insurance are taken off. For the self-employed, it's usually turnover (total sales) before business expenses are deducted.
Net income is what remains after deductions. The exact definition depends on context:
- Net pay (take-home): gross salary minus income tax, NI, pension contributions, student loan — what actually arrives in your bank.
- Net profit (self-employed): turnover minus allowable business expenses — the profit HMRC taxes.
- Adjusted net income (HMRC term): gross income minus gross pension contributions and Gift Aid — used for Personal Allowance taper and Child Benefit Charge calculations.
Worked example: employee on £50,000
Starting with a £50,000 gross salary for 2026/27 (England/Wales/NI, no student loan, no pension):
| Deduction | Amount | Running total |
|---|---|---|
| Gross salary | £50,000 | £50,000 |
| Income tax (20% on £37,430) | −£7,486 | £42,514 |
| National Insurance (8% on £37,700) | −£3,016 | £39,498 |
| Net take-home | £39,498/year | £3,291/month |
Effective deduction rate: 21%. You keep 79p of every £1 earned.
Worked example: employee on £100,000
At £100,000, higher-rate tax kicks in:
| Deduction | Amount | Running total |
|---|---|---|
| Gross salary | £100,000 | £100,000 |
| Income tax (20% on £37,700 + 40% on £49,730) | −£27,432 | £72,568 |
| NI (8% on £37,700 + 2% on £49,730) | −£4,011 | £68,557 |
| Net take-home | £68,557/year | £5,713/month |
Effective deduction rate: 31%. You keep 69p of every £1 earned.
Worked example: employee on £150,000 (inside additional rate)
Above £125,140 the additional rate (45%) applies, and Personal Allowance is fully tapered:
| Deduction | Amount | Running total |
|---|---|---|
| Gross salary | £150,000 | £150,000 |
| Income tax (no PA + 20/40/45% bands) | −£52,703 | £97,297 |
| NI | −£5,011 | £92,286 |
| Net take-home | £92,286/year | £7,690/month |
Effective deduction rate: 38%. You keep 62p of every £1 earned.
Note the pattern: effective rates rise with gross income — 21% at £50k, 31% at £100k, 38% at £150k. The bigger your gross, the larger the gap to net.
Self-employed: gross vs net works differently
If you're self-employed, "gross income" usually means turnover (total sales or professional fees received). "Net profit" is what remains after allowable business expenses. HMRC taxes your net profit, not your turnover.
Example: Freelance consultant with £100,000 gross turnover and £25,000 of allowable business expenses:
- Gross turnover: £100,000
- Less expenses: −£25,000
- Net profit (taxable): £75,000
- Income tax + Class 4 NI on £75,000: approximately £20,500
- After-tax income: approximately £54,500
So a self-employed consultant on £100,000 turnover has about £54,500 in their pocket. An employee on £100,000 salary has about £68,500 in theirs. The difference is largely because the employee didn't incur £25,000 of business expenses — their employer did.
Student loan deductions
If you have a student loan, it comes out of gross income too. The rate depends on your plan type:
- Plan 1 (pre-2012 starters): 9% on earnings above £26,900 (2026/27)
- Plan 2 (post-2012 English/Welsh starters): 9% above £29,385
- Plan 4 (Scottish post-2012): 9% above £33,795
- Plan 5 (post-August 2023 English/Welsh starters): 9% above £25,000, 40-year repayment term
- Postgraduate loan: 6% above £21,000
Student loan is a deduction from gross pay but isn't strictly a tax — it's loan repayment. It still reduces take-home.
Pension contributions
Workplace pensions (auto-enrolment) typically deduct at least 5% of qualifying earnings from your gross pay. Most schemes use "relief at source" or "net pay" arrangements — both reduce your gross taxable income, so you get tax relief at your marginal rate automatically.
A £100 pension contribution:
- Costs a basic-rate taxpayer £80 net
- Costs a higher-rate taxpayer £60 net
- Costs a 60%-trap taxpayer £40 net
- Costs an additional-rate taxpayer £55 net
Why the gap matters
Mortgage affordability, rental contracts, budgeting, disposable income — all real-world decisions use net income, not gross. Yet job offers are quoted in gross. The gap can make a "£80,000 role" feel like £55,000 in practice.
See your actual take-home with our UK Income Tax Calculator — enter any salary from £15k to £200k and see the exact deductions for your region (England/Wales/NI or Scotland).
Adjusted Net Income: HMRC's third definition
HMRC has its own specific definition of "net income" used for certain calculations. Adjusted Net Income (ANI) is:
Gross total income
− Gross pension contributions (if paid net to pension scheme)
− Gift Aid donations (grossed up)
− Trading losses carried forward
− Certain other reliefs
= Adjusted Net Income
ANI is not reduced by income tax or NI. It's the number HMRC uses for:
- Personal Allowance taper above £100,000
- High Income Child Benefit Charge above £80,000
- Pension annual allowance taper for very high earners
Someone close to a threshold can often reduce ANI through pension contributions or Gift Aid — a meaningful planning lever.
Frequently asked questions
What's the difference between gross and net income?
Gross = before deductions. Net = after deductions. For employees, gross is salary on contract; net is take-home pay. For self-employed, gross is turnover; net is profit after business expenses.
How much tax and NI does a £50,000 salary pay in the UK?
Approximately £7,486 income tax + £3,016 NI = £10,502. Net take-home around £39,500 (78.9% of gross).
What is adjusted net income?
HMRC's specific calculation: gross income minus pension contributions and Gift Aid (grossed up), but NOT minus income tax. Used for Personal Allowance taper, Child Benefit Charge, and pension allowance calculations.
Is my salary gross or net?
UK job offers and employment contracts quote gross salary. Payslips show both gross and net. Deposits in your bank account are net.
Why does my net pay vary month to month?
Common causes: tax code changes, bonuses or overtime, salary sacrifice adjustments, student loan reaching threshold, or pension contribution changes.
Do I pay tax on gross or net income?
HMRC taxes gross income minus Personal Allowance and allowable reliefs — not your take-home pay. So technically HMRC taxes "taxable income" (after allowances) but before income tax deductions.
Quick links
- UK Income Tax Calculator — see your take-home
- UK Tax Guide 2026/27
- What is Income? UK Terminology
- What is Taxable Income?
- UK Personal Allowance
- UK Income Tax Rates
