Net to Gross Salary Explained

Gross salary is what your employer pays you before deductions. Net salary is what you actually receive. The gap between the two — income tax, National Insurance, pension — is often larger than people expect.

Gross vs Net: Key Definitions

What Gets Deducted from Gross Pay?

For a typical UK employee the main deductions are:

1. Income tax — based on your tax band and tax code. In 2026/27: 20% on £12,571–£50,270, 40% on £50,271–£125,140.
2. Employee National Insurance — 8% on £12,571–£50,270, 2% above.
3. Pension contributions — auto-enrolment minimum is 5% employee + 3% employer on qualifying earnings. These may be before or after tax depending on the scheme type.
4. Student loan repayments — if applicable, repaid at 9% (Plan 1/2) or 6% (Plan 4/5) above the relevant threshold.

Net-to-Gross Worked Examples

How Pension Contributions Affect Net-to-Gross

Salary sacrifice pension contributions reduce your taxable income and your NI-liable earnings. This means for every £100 you contribute via salary sacrifice, you typically save £20–£40 in combined tax and NI — so the actual cost to your net pay is only £60–£80.

This makes salary sacrifice pensions more efficient than standard pension contributions made from net pay. See our Salary Sacrifice guide for a detailed comparison.

Why Employers Quote Gross

Gross salary is the contractual figure that benchmarks pay across the market. It doesn't vary by person — two employees on £40,000 gross have the same contract value even if one has student loans and one doesn't. When comparing job offers or negotiating salary, always compare gross figures.