Everything you need to know about UK tax, National Insurance, and take-home pay calculations
UK income tax is calculated using progressive tax bands: 0% on income up to £12,570 (personal allowance), 20% on income from £12,571 to £50,270 (basic rate), 40% on income from £50,271 to £125,140 (higher rate), and 45% on income above £125,140 (additional rate). Scotland has different rates and bands.
National Insurance (NI) funds state benefits like the NHS and state pension. For 2024/25: you pay 12% on earnings between £12,570-£50,270, and 2% on earnings above £50,270. Self-employed pay Class 2 (£3.45/week if profits >£6,515) and Class 4 (9% on profits £12,570-£50,270, 2% above).
Your £12,570 personal allowance reduces by £1 for every £2 of income above £100,000. It's completely removed when your income reaches £125,140, creating an effective 60% tax rate between £100,000-£125,140.
Repayments depend on your loan plan: Plan 1 (pre-2012): 9% on income above £22,015. Plan 2 (2012-2023): 9% on income above £27,295. Plan 5 (post-2023): 9% on income above £25,000. Postgraduate loans: 6% on income above £21,000. Multiple plans can apply simultaneously.
Yes, but consider the interest rate vs other investments. Plan 1 loans use RPI or Bank of England base rate +1% (whichever is lower). Plan 2/5 use RPI +3% while studying, then RPI + 0-3% based on income. Many loans are written off after 25-30 years.
Pension contributions receive tax relief: 20% for basic rate taxpayers, 40% for higher rate, 45% for additional rate. The annual allowance is £60,000 (2024/25), but tapers for high earners. Salary sacrifice schemes can also save National Insurance.
Salary sacrifice reduces both income tax and National Insurance. Common schemes include pensions, cycle-to-work, electric cars, and childcare vouchers. Your gross salary reduces, but take-home pay often increases due to tax savings.
Self-employed pay income tax on profits (same rates as employed), Class 2 NI (£3.45/week if profits >£6,515), and Class 4 NI (9% on profits £12,570-£50,270, 2% above). You can deduct business expenses and claim allowances like home office costs.
You can claim expenses 'wholly and exclusively' for business: office costs, travel, equipment, professional fees, insurance, marketing, and training. Home office costs can be claimed using simplified flat rates or actual costs method.
Our calculator uses the latest HMRC rates and is updated for 2024/25. It covers most common scenarios but may not account for complex situations like split-year treatment, non-dom status, or specific reliefs. Always consult a qualified advisor for major financial decisions.
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