Take-home pay explained

Most public sector salaries lose four things before they reach 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.

That order means a pension contribution lowers your tax but leaves your NI and student loan repayments untouched. Salary sacrifice cuts your gross pay itself, so it lowers all three. Salary sacrifice schemes are covered separately.

A worked example: NHS band 5

Take a nurse in England at the band 5 entry point of £32,073, with a 1257L tax code, in the NHS Pension Scheme, and with 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 − £2,662.06 − £12,570)	£3,368.19
National Insurance	8% of (£32,073 − £12,570)	£1,560.24
Student loan Plan 2	9% of (£32,073 − £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 The Personal Allowance is withdrawn by £1 for every £2 over £100,000.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, with the rate rising 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

Repayments are 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

Your payslip lists each deduction on its own line, 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 you receive. For another salary, or the effect of a pay rise, try the take-home pay calculator or read how much of a pay rise you keep.