How UK Income Tax is calculated
Income Tax is charged in bands, so different parts of your income can be taxed at different rates. The standard personal allowance is deducted first, followed by basic, higher and additional rate bands. Your marginal rate is the rate applied to the next pound you earn, while your effective rate measures total deductions as a share of gross income.
Income Tax and National Insurance
Income Tax and National Insurance are separate deductions. Employee National Insurance is based on earnings and uses its own thresholds and rates. The calculator shows both so you can see why take-home pay is lower than gross salary.
Pensions and tax codes
Pension contributions can reduce taxable pay depending on how the scheme is arranged. Your PAYE tax code also controls how much tax-free allowance payroll applies. Emergency, BR, D0 and K codes can produce a different result from a standard estimate.