In the UK, two taxes reduce your gross salary to take-home pay: Income Tax (via PAYE) and National Insurance Contributions (NICs). Understanding both — and how they interact — helps you make sense of your payslip and plan your finances more effectively.
Employee National Insurance 2025-26
Employee NIC rates changed significantly in 2024. The main rate was cut from 12% to 8%:
| Earnings | Employee NIC Rate |
|---|---|
| £0 – £12,570 (Primary Threshold) | 0% |
| £12,571 – £50,270 (Upper Earnings Limit) | 8% |
| Above £50,270 | 2% |
Employer NIC: 15% above the Secondary Threshold (£5,000/year from April 2025). The employer pays this separately — it doesn't directly reduce your take-home but affects total employment cost.
Worked Example — £30,000 Salary
| Gross Salary | £30,000 |
| Income Tax (20% on £17,430) | −£3,486 |
| Employee NIC (8% on £17,430) | −£1,394 |
| Annual Take-Home | £25,120 |
| Monthly | ~£2,093/mo |
Worked Example — £50,000 Salary
| Gross | £50,000 |
| Income Tax (20% × £37,700) | −£7,540 |
| Employee NIC (8% × £37,700) | −£3,016 |
| Annual Take-Home | £39,444 |
| Monthly | ~£3,287/mo |
Worked Example — £80,000 Salary
| Gross | £80,000 |
| Income Tax: 20% × £37,700 + 40% × £29,730 | −£19,432 |
| Employee NIC: 8% × £37,700 + 2% × £29,730 | −£3,611 |
| Annual Take-Home | £56,957 |
| Monthly | ~£4,746/mo |
Effective combined rate: 29.4%. Above 40% income tax band but NIC's 2% rate above UEL softens the blow.
Student Loan Repayments
If you have a UK student loan, repayments are deducted from payroll alongside tax and NIC:
- Plan 1 (started before 1 Sept 2012): 9% on income above £24,990/year.
- Plan 2 (started 1 Sept 2012–July 2023): 9% on income above £27,295/year.
- Plan 4 (Scottish students, post-2006): 9% on income above £31,395/year.
- Plan 5 (started Aug 2023+): 9% on income above £25,000/year.
Student loan repayments come out after income tax, but effectively behave like a marginal tax increase of 9% in the relevant income range.
Salary Sacrifice Pension
If your employer offers salary sacrifice, your pension contributions go in before NIC is calculated — saving you 8% (or 2% if above UEL) in employee NIC on top of income tax relief. A £1,000 pension contribution via salary sacrifice saves £80–£200 more than a personal contribution for most earners. Employers also save 15% employer NIC, which many pass back to you as additional pension contribution.
Calculate your UK take-home pay
Open Take-Home Calculator →Source: HMRC, gov.uk. Tax Year 2025-26. Not financial advice.