What is my pay rise worth after tax?
A £5,000 pay rise does not mean £5,000 more in your bank account. The useful number is the increase in annual and monthly take-home after the extra Income Tax, National Insurance and any student-loan or pension deductions.
Why the headline rise is misleading
Income Tax is progressive, so only the slice of income in each band is taxed at that band's rate. Employee National Insurance and student-loan deductions can also change as salary rises. That is why a percentage pay rise should be translated into extra take-home per month before you judge its real value.
Example: moving through a tax threshold
If a rise takes salary across a threshold, the entire salary is not suddenly taxed at the higher rate. Only the relevant slice above the threshold is. NetSlip's Pay Rise calculator calculates both salaries independently and shows the difference.
Pay rises around £100,000
For adjusted net income above £100,000, the Personal Allowance is reduced by £1 for every £2 of excess income until it is fully removed. This can make a pay rise in that range worth substantially less in take-home terms than the headline increase suggests.
Pension planning matters here. Depending on your scheme, pension contributions or salary sacrifice can reduce adjusted net income. See the linked £100k and salary-sacrifice guides for the mechanics.
Related NetSlip tools & guides
FAQs
Is only the extra pay taxed at the higher rate?
Yes. UK Income Tax bands are marginal: crossing a threshold does not apply the higher rate to all of your salary.
How do I calculate the monthly value of a pay rise?
Compare annual take-home before and after the rise, then divide the difference by 12 for an annualised monthly figure.
Can a pay rise reduce my Personal Allowance?
Yes. If adjusted net income rises above £100,000, the Personal Allowance starts to taper away.