Pay Rise Calculator UK (2026/27)
Find out exactly how much of your pay rise reaches your bank account. Calculate marginal deductions across Income Tax, Class 1 NI, workplace pensions, and Student Loans.
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Understanding Marginal Retention on UK Salary Increases
Receiving a pay rise is a significant milestone, but the amount that actually arrives in your monthly paycheck is often lower than anticipated. Under the Income Tax Act 2007 (ITA 2007) and the Social Security Contributions and Benefits Act 1992 (SSCBA 1992), salary increases are taxed at your marginal deduction rate—the tax rate applied to your uppermost layer of earnings.
Because your existing basic salary already utilizes your £12,570 tax-free Personal Allowance, every single pound of an incremental pay rise is exposed to mandatory payroll deductions. Depending on your salary band, student loan repayment obligations, and auto-enrolment pension contributions, your net retention can range from 72% down to as little as 29%.
Marginal Deduction Rates: How Much of Each Pound You Keep
The statutory rates below illustrate the percentage of deductions applied to each additional pound earned in England, Wales, and Northern Ireland for the 2026/27 tax year:
| Salary Tier | Income Tax | National Insurance | Standard Retention | With Plan 2 Student Loan |
|---|---|---|---|---|
| Personal Allowance (£0 – £12,570) | 0% | 0% | 100% kept | 100% kept |
| Basic Rate (£12,571 – £50,270) | 20% | 8% | 72% kept | 63% kept |
| Higher Rate (£50,271 – £100,000) | 40% | 2% | 58% kept | 49% kept |
| £100k Taper Trap (£100,001 – £125,140) | 60% effective | 2% | 38% kept | 29% kept |
| Additional Rate (£125,141+) | 45% | 2% | 53% kept | 44% kept |
Worked Example: A £5,000 Pay Rise Crossing the £50,270 Threshold
Consider an employee currently earning £48,000 who receives a £5,000 pay rise to £53,000. Because this increase crosses the statutory £50,270 Higher Rate threshold, the increment spans two different tax tiers:
| Portion of Pay Rise | Gross Increment | Income Tax | Class 1 NI | Net Retained |
|---|---|---|---|---|
| Slice 1: Under £50,270 (£48k to £50,270) | £2,270.00 | -£454.00 (20%) | -£181.60 (8%) | £1,634.40 (72.0%) |
| Slice 2: Over £50,270 (£50,270 to £53k) | £2,730.00 | -£1,092.00 (40%) | -£54.60 (2%) | £1,583.40 (58.0%) |
| Total £5,000 Increment Retention | £5,000.00 | -£1,546.00 | -£236.20 | £3,217.80 (64.36%) |
Threshold Cliff-Edge Warning Matrix (2026/27)
In the UK tax system, certain salary thresholds create severe “cliff edges” where incremental earnings trigger abrupt deduction surges or statutory benefit clawbacks. If your pay rise pushes you across any of these three critical boundaries, here is what happens to your cash take-home:
£50,270 Higher Rate Threshold
Every pound above £50,270 is taxed at the 40% Higher Rate rather than 20% Basic Rate. Although Class 1 NI drops from 8% to 2%, your marginal deductions jump significantly:
£60,000 – £80,000 Child Benefit (HICBC)
If you or your partner receive Child Benefit, earning above £60,000 Adjusted Net Income triggers the High Income Child Benefit Charge under the Finance Act 2024:
At £70,000 ANI, 50% of Child Benefit is lost. At £80,000+, 100% is clawed back.
£100,000 – £125,140 The 60% Taper Trap
Every £2 earned over £100,000 strips away £1 of your £12,570 tax-free Personal Allowance, creating an effective 60% Income Tax rate:
Salary Sacrifice Mitigation Guide: Retain 100% of Your Pay Rise
When a pay rise pushes your salary across £50,270, £60,000, or £100,000, taking the increase as taxable cash yields diminished returns due to 42%–62% marginal tax rates. By arranging with your employer to sacrifice the pay rise portion directly into your workplace pension, you legally preserve 100% of your wealth tax-free.
How Pension Salary Sacrifice Works
Under a contractual salary sacrifice agreement (optional remuneration arrangement under Section 69A ITEPA 2003), your contractual gross salary is reduced by the pay rise amount, and your employer contributes that identical sum directly into your registered pension scheme.
- Bypasses 40% or 45% PAYE Income Tax entirely.
- Saves 2% employee Class 1 National Insurance.
- Avoids 9% student loan deductions on the sacrificed amount.
- Employer saves 15% employer NI and may share the savings.
The £10k Pay Rise Showdown: Cash vs Pension
60% Income Tax (-£6,000) + 2% NI (-£200) + 9% Plan 2 Loan (-£900) = Only £2,900 to £3,800 reaches your bank account.
Full £10,000 lands in your pension pot. You retain 100% of your earnings, save £6,200 in taxes, and protect Tax-Free Childcare.
UK Pay Rise & Salary Increase FAQs (2026/27)
Frequently asked questions about pay rise tax deductions, marginal rates, and take-home retention.
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Annual employment estimate
Use the stated tax code and gross pay to compare employment deductions in England, Wales and Northern Ireland. Monthly, weekly and daily figures divide an annual result; they do not reconstruct cumulative payroll.
The main pension input models salary sacrifice. Irregular pay, benefits in kind, multiple employments and a different pension method can change a real payslip. Use the Scottish tool for Scottish employment income.
Check the rules for your circumstances
Official guidance supports the rules described here; it does not approve or certify this calculator. Confirm dates, eligibility and unsupported cases before making a financial decision.