Calculating tax – how much will you take home each month?

Want to know how much salary you’ll really earn from a new job? Find out how to calculate your take home wage after Income Tax and National Insurance have been deducted.

A common issue we face when looking for new jobs, reading adverts and deciding on job offers is figuring out how much you will earn after tax and National Insurance has been factored in.

Deciding between two jobs may come down to salary, but is the job that pays £2k more actually going to be the better option? Does that amount to much more in your paycheck each month or is the lower paid position actually a better fit for what you are looking for?

It’s an important decision to make and with salaries being squeezed, having clarity on this is very important. So what is Income Tax and National Insurance, and how much will you have to pay?

What are Income Tax and National Insurance?

In the UK, your salary is subject to Income Tax and National Insurance contributions, which will automatically be deducted from your salary before it is paid to you.

You may also be liable to pay back a student loan debt as well as contributions to a pension fund (although private pension contributions are optional). It can all be a bit complicated.

How much money lands in your bank account each month depends on a number of factors and by the time your annual salary has been divided by month and subjected to tax, it looks a lot different.

So how are you supposed to weigh up a salary offer, and how much will actually be paid into your account each month?

How much Income Tax will you pay?

Income Tax is the rate that you pay on your basic salary on amounts exceeding your personal allowance, which is currently set at £11,500. You pay income tax on everything you earn over that amount.

Depending on your circumstances, your personal allowance may be lower. For example, if you claim marriage or disability allowance then it may be higher. Alternatively, if you are a high earner, then the personal allowance will be lower.

How much National Insurance will you pay?

National Insurance (NI) contributions are payable by earners aged over 16 and over who earn more than £156 per week or are self-employed and make a profit of at least £6,025 per year.

Employees within the UK pay NI contributions in order to qualify for certain benefits such as a state pension or maternity allowance. There are different classes of NI payments and your personal circumstances will determine the amount you pay.

How can you work out your actual salary?

So, how are you supposed to weigh up a salary offer, and how much will actually be paid into your account each month?

This tax calculator will determine your personal allowance based on your situation and adjust your take-home pay accordingly. You can view your projected take-home salary by year, month, week and day. You can also see the deductions that are made for income tax, national insurance and student loans.

Hopefully, after being armed with details about what pay you are likely to receive month-to-month, you are in a position to make an informed decision about the next step in your career.

Photo by Blubel