Glossary

Gross salary is the headline figure on your contract or job offer — the amount your employer agrees to pay you before HMRC and your pension scheme take their share. Take-home (net) pay is always lower than gross.

Net pay is the amount left after PAYE income tax, National Insurance, student loan repayments and pension contributions are removed from your gross salary. It's the figure that matters for budgeting.

Almost everyone gets a Personal Allowance — for 2026/27 it's £12,570. You pay 0% income tax on earnings up to this amount. It tapers away by £1 for every £2 earned over £100,000 and disappears entirely at £125,140.

PAYE means tax and National Insurance are taken from your wages by your employer before you receive them, then forwarded to HMRC. Your tax code tells the employer how much allowance to apply.

UK income tax is banded. For 2026/27 (England, Wales, NI): 20% on £12,571–£50,270, 40% on £50,271–£125,140, and 45% above £125,140. Scotland uses its own five-band system.

Scottish taxpayers pay rates set by the Scottish Parliament: roughly 19% Starter, 20% Basic, 21% Intermediate, 42% Higher and 47% Top. National Insurance and the Personal Allowance are still set by Westminster.

Employees pay Class 1 NI on earnings between the Primary Threshold (£12,570) and the Upper Earnings Limit (£50,270) at 8%, and 2% on earnings above that. NI contributions also build entitlement to the State Pension.

Below the Primary Threshold you pay no employee NI but your earnings can still count towards your State Pension record if they're above the Lower Earnings Limit.

The Upper Earnings Limit (UEL) is where the main 8% NI rate ends. Anything above £50,270 is still subject to NI, but only at 2%.

Repayments are 9% of earnings over the threshold for Plans 1, 2, 4 and 5, and 6% for Postgraduate Loans. Thresholds vary: Plan 1 ~£26,065, Plan 2 ~£28,470, Plan 4 ~£32,745, Plan 5 ~£25,000, PGL ~£21,000.

Plan 1 borrowers repay 9% of income over roughly £26,065. Outstanding balances are written off after 25 years (or at age 65 for older loans).

Plan 2 borrowers repay 9% of income over roughly £28,470. Loans are written off 30 years after the April you became liable to repay.

Plan 4 covers Scottish students. Repayments are 9% of income over roughly £32,745, written off 30 years after first becoming liable.

Plan 5 borrowers repay 9% over roughly £25,000 and the loan is written off after 40 years. The lower threshold means most graduates start repaying earlier than under Plan 2.

If you took out a postgraduate Master's or Doctoral loan you repay an additional 6% on earnings over roughly £21,000. PGL runs alongside Plan 1/2/4/5 deductions.

Most employers must auto-enrol you into a workplace pension. The minimum total contribution is 8% of qualifying earnings (3% employer, 5% employee). Tax relief is added by the pension provider at the basic rate.

With salary sacrifice your gross pay is reduced and your employer pays the agreed amount straight into your pension. Because your gross is lower, you pay less income tax AND less National Insurance — usually a better deal than relief at source.

Once your adjusted net income passes £100,000, your Personal Allowance shrinks by £1 for every extra £2. By £125,140 it's gone entirely, creating an effective marginal tax rate of around 60% in that band.

If you're registered as severely sight impaired (or live in Scotland/NI and meet equivalent criteria) you can claim Blind Person's Allowance, which raises the amount you can earn tax-free. Unused allowance can be transferred to a spouse or civil partner.

If one partner earns under £12,570 and the other is a basic-rate taxpayer, the lower earner can transfer 10% of their Personal Allowance — saving up to £252 a year as a couple.

Unlike your marginal rate (the rate on your next pound earned), the effective rate averages everything you actually pay. It's usually much lower than your top band because of the Personal Allowance.

If you're too ill to work, your employer must pay SSP for up to 28 weeks, provided you earn at least the Lower Earnings Limit. Many employers top this up via a contractual sick pay scheme.

SMP is paid for up to 39 weeks. The first 6 weeks are 90% of your average weekly earnings; the remaining 33 weeks are paid at the lower of the statutory flat rate (~£194.32/week for 2026) or 90% of earnings.

Bonuses are subject to PAYE income tax and National Insurance just like regular wages. A large bonus can temporarily push you into a higher tax band for that pay period.

Overtime pay (whether at flat rate or time-and-a-half) is treated as ordinary earnings for tax and NI. There is no special tax treatment.