Question 1

Why do I keep less than my pay rise amount?

Accepted Answer

Every pound of pay rise is subject to income tax and National Insurance at your marginal rate. A basic-rate taxpayer pays 20% income tax and 8% NI on earnings between £12,570 and £50,270  -  keeping 72p of every extra £1. A higher-rate taxpayer above £50,270 pays 40% income tax and 2% NI  -  keeping only 58p. Add student loan repayments (9% above your threshold) and the proportion kept can fall to 49% of the gross rise.

Question 2

What if my pay rise pushes me into a higher tax band?

Accepted Answer

Only the income above the threshold is taxed at the higher rate  -  tax bands work incrementally. If you earn £49,000 and get a £3,000 rise to £52,000, only the £1,730 above the £50,270 higher-rate threshold is taxed at 40%. The rest is still taxed at 20%. This calculator handles band crossings automatically  -  you will see the correct blended effective rate for your specific numbers.

Question 3

Does a salary increase affect my pension contributions?

Accepted Answer

If you contribute a fixed percentage to your pension (which most workplace schemes use), a higher salary means a higher pension contribution in pounds. This calculator uses a percentage  -  if you contribute 5% of salary, it calculates the pension deduction on both the old and new salary. Pension contributions reduce your taxable income, so the net effect is not simply "5% less than the gross rise"  -  it depends on your marginal tax rate.

Question 4

How much extra do I actually take home from a £3,000 pay rise?

Accepted Answer

For a basic-rate taxpayer (income between £12,570 and £50,270), a £3,000 gross pay rise nets approximately £2,160 after 20% tax and 8% NI (72% retention rate)  -  that is £180 extra per month. For a higher-rate taxpayer, the same rise nets only £1,740, or £145 per month. If you also repay a Plan 2 student loan, deduct a further 9% on top, leaving you with around 63p per extra £1 earned, adding £1,890 from a £3,000 rise.

Question 5

Is it better to take a pay rise or put the money into my pension?

Accepted Answer

For a basic-rate taxpayer, you keep 72p from a pay rise but get the full £1 of pension contribution working for you. For a higher-rate taxpayer, the difference is even starker  -  you keep 58p as cash but the pension gets £1 plus full tax relief. If you can afford to live without the extra take-home, salary sacrifice into a pension is often the more tax-efficient choice. It also reduces employer NI, and some employers pass on that saving as additional pension contribution.

Question 6

Will my tax code change when I get a pay rise?

Accepted Answer

Usually not immediately. HMRC issues your tax code based on your expected income, and PAYE adjusts automatically as your pay rises. If your pay rise pushes you into a new tax band or affects a benefit (like the High Income Child Benefit Charge above £60,000, or the personal allowance taper above £100,000), HMRC will eventually update your code  -  but this can lag by a pay period or more. If you think you are on the wrong code, check via your Personal Tax Account at gov.uk.

Question 7

Does a pay rise affect my pension contributions in pounds?

Accepted Answer

If you contribute a fixed percentage to your pension (as most workplace auto-enrolment schemes require), a pay rise increases your monthly pension contribution in pounds. For example, a 5% employee contribution on a £32,000 salary is £133/month; on a £36,000 salary it is £150/month. This reduces the net monthly benefit of the pay rise slightly, but the extra pension saving is also tax-free (reducing your taxable income). The combined effect means you keep less each month than the gross rise implies, but your pension grows faster.

Pay Rise Calculator UK 2026/27 - How Much Extra Take-Home?