Take-home pay explained

Four things come off most public sector salaries before the money reaches your bank account: a pension contribution, Income Tax, National Insurance and, for some, a student loan repayment. Take £32,073, the entry point of NHS band 5 in England. After those deductions, someone in the NHS Pension Scheme with a Plan 2 student loan keeps about £24,241 a year, or roughly £2,020 a month.

The order deductions are worked out

Payroll works through the deductions in a set order, because some of them change the figure the next one is based on.

1. Gross pay for the period: salary, plus any overtime, enhancements or allowances.
2. Pension contribution: in public sector schemes this comes off before Income Tax, using a net pay arrangement.
3. Income Tax: worked out on gross pay minus the pension contribution, using your tax code.
4. National Insurance: worked out on gross pay, before the pension contribution.
5. Student loan: worked out on gross pay, before the pension contribution.
6. Other deductions: union subscriptions, salary sacrifice, payroll giving, car parking, and so on.

A pension contribution therefore lowers your tax but leaves your NI and student loan repayments as they were. Salary sacrifice cuts your gross pay itself, so it lowers all three; see salary sacrifice schemes.

A worked example: NHS band 5

Say a nurse in England earns the band 5 entry point of £32,073, has a 1257L tax code, is in the NHS Pension Scheme and has a Plan 2 student loan.

Step	Calculation	Yearly
Gross salary		£32,073.00
Pension	8.3% of £32,073	£2,662.06
Income Tax	20% of (£32,073 minus £2,662.06 minus £12,570)	£3,368.19
National Insurance	8% of (£32,073 minus £12,570)	£1,560.24
Student loan Plan 2	9% of (£32,073 minus £29,385)	£241.92
Take-home pay		£24,240.59

That comes to about £2,020 a month, or about £2,040 without the student loan. The band 5 take-home pay page runs the same figures with unsocial hours and London weighting added.

Income Tax

In England, Wales and Northern Ireland, the first £12,570 of taxable income is covered by the Personal Allowance. The next £37,700 is taxed at 20 per cent, up to £50,270. Income from £50,271 to £125,140 is taxed at 40 per cent, and above that at 45 per cent. The Personal Allowance is withdrawn by £1 for every £2 over £100,000.

Scottish taxpayers pay at six rates from 19 to 48 per cent, with the higher rate starting at £43,663. How income tax works covers both systems.

National Insurance

Employees pay 8 per cent on earnings between £12,570 and £50,270 a year, and 2 per cent above that. Each pay period is calculated separately, so monthly the 8 per cent band runs from £1,048 to £4,189. NI is not corrected over the year the way Income Tax is, and net pay pension contributions do not reduce it.

Pension contributions

Public sector schemes take a percentage of your pensionable pay, and the rate rises as you earn more. In 2026/27:

• NHS Pension Scheme (England and Wales): 5.2 to 12.5 per cent
• Teachers’ Pension Scheme: 7.4 to 12 per cent
• Local Government Pension Scheme main section: 5.5 to 12.5 per cent, or half that in the 50/50 section
• Civil Service alpha: 4.6 to 8.05 per cent

These come off before tax, so for a basic rate taxpayer each £1 paid in costs about 80p. The pension guides, such as the NHS Pension Scheme page, list the full tiers.

Student loans

You repay 9 per cent of pay above your plan’s threshold: £26,900 for Plan 1, £29,385 for Plan 2, £33,795 for Plan 4 and £25,000 for Plan 5. A Postgraduate Loan adds 6 per cent above £21,000. As with NI, each pay period is worked out on its own.

Checking your own figures

Each deduction has its own line on your payslip, with year-to-date totals. Reading your payslip explains the layout, and gross vs net salary covers the gap between the advertised salary and what arrives. The take-home pay calculator works for any other salary, and how much of a pay rise you keep covers pay rises.