What is net income?
Written by
Emily Tye
Reviewed by
Amy LancashireNet income is the money you keep after tax and other deductions come off your earnings. For most UK employees, it's the same as take-home pay: your salary minus Income Tax, National Insurance and any pension contributions or student loan repayments. It's the amount that actually reaches your bank account.
Businesses use 'net income' to mean something slightly different, which we cover at the end of this guide.
What's the difference between gross and net income?
Gross income is what you earn before anything is taken off. It's also what people usually mean when they talk about their annual salary. Net income is what's left once the deductions have come out.
You'll see both figures every payday. GOV.UK says your payslip must show your earnings before and after any deductions.
Gross income | Net income | |
|---|---|---|
What it is | Your pay before deductions | Your pay after deductions |
Where you'll see it | Gross pay' on your payslip, and usually the salary figure people quote | Net pay' on your payslip and the money paid into your bank account |
What it's used for | The starting point for working out your tax, National Insurance and student loan repayments | Budgeting, because it's the money you actually have |
What gets taken off my pay?
If you're an employee, most deductions come out through your employer's payroll before you're paid. Income Tax and National Insurance are taken through Pay As You Earn (PAYE).
These are the main deductions, using rates for the 2026/27 tax year, which runs from 6 April 2026 to 5 April 2027.
Income Tax. Most people can earn £12,570 a year tax-free, which is called the Personal Allowance. After that, you pay 20% on income up to £50,270, 40% up to £125,140 and 45% on anything above. These are the Income Tax rates for England, Wales and Northern Ireland. Scotland has its own Income Tax bands, with 6 rates from 19% to 48%.
National Insurance. You pay 8% on earnings between £12,570 and £50,270 a year, and 2% on anything above that, according to HMRC's 2026/27 rates and thresholds.
Workplace pension. If you've been auto-enrolled into a workplace pension, the minimum you pay is 5% and your employer pays at least 3%. In most schemes, this is worked out on your earnings between £6,240 and £50,270 a year. Tax relief from the government makes up part of your 5%.
Student loan. Once you earn more than your plan's threshold, 9% of your earnings above it comes off your pay. For a Postgraduate Loan, it's 6%.
Other deductions. These can include union subscriptions, repaying a loan or advance from your employer, and debt payments a court has told your employer to take.
Salary sacrifice works differently. Instead of a deduction, you agree to give up part of your salary in exchange for a benefit, such as extra pension contributions, so your gross pay is lower to begin with.
How do I work out my net income?
Start with your gross pay and take off each deduction in turn. Here's how it works for someone earning £39,039 a year, which was the median for full-time employees in the UK in April 2025 among those who'd been in their job for at least a year.
This is a simplified illustration. It assumes you live in England, have no other income and have the tax code 1257L, which is the code for most people with one job and gives you the standard £12,570 Personal Allowance. It uses 2026/27 rates and works out the figures for a whole year, while your employer works them out each payday.
Take off your Personal Allowance. £39,039 minus £12,570 leaves £26,469 to be taxed
Work out your Income Tax. All £26,469 falls in the 20% band, so your tax is £5,293.80
Work out your National Insurance. You pay 8% on the same £26,469, which is £2,117.52
Take both off your gross pay. £39,039 minus £5,293.80 minus £2,117.52 leaves £31,627.68
That's a net income of £31,627.68 a year, or £2,635.64 a month.
Other deductions would bring it down further:
Plan 2 student loan: 9% of the £9,654 you earn above £29,385, which is £868.86 a year
Minimum workplace pension: 5% of your qualifying earnings (£39,039 minus £6,240, so £32,799) is £1,639.95. For a basic-rate taxpayer, tax relief covers a fifth of that, so your take-home pay only drops by £1,311.96. This works out the same whether your scheme takes your contribution before tax or claims the tax relief afterwards. Salary sacrifice schemes work differently.
With both, your net income would be £29,446.86 a year, or about £2,454 a month.
Is net income the same as net pay?
For most employees with one job, yes. 'Net pay' is what your payslip calls your pay after deductions for that pay period, and 'take-home pay' means the same thing.
'Net income' can be broader. It covers all your income after tax, so it can also include a second job, rent from a property you let out or profit from self-employment.
If you're self-employed, your net income is your profit (what you've earned minus allowable business expenses) after Income Tax and National Insurance. You pay these through Self Assessment rather than through payroll.
Why should I budget with my net income?
Because it's the money you actually have to spend. In the example above, a £39,039 salary is £3,253.25 a month before deductions, but £2,635.64 after Income Tax and National Insurance. If you budgeted from the gross figure, you'd be planning to spend more than £600 a month you never receive.
The same goes for pay rises. If you're a basic-rate taxpayer in England, a £1,000 rise is worth £720 to you after 20% Income Tax and 8% National Insurance. If you're also repaying a Plan 2 student loan and earn over the threshold, it's worth £630.
That's why the first step in our guide on how to budget is working out your take-home pay.
What is adjusted net income?
Adjusted net income is a different figure from your take-home pay. HMRC uses it to decide things like whether you have to pay back Child Benefit.
It's roughly your income before tax. You add up your taxable income, such as your salary, savings interest and rental income, then take off a few things, like Gift Aid donations and some pension contributions. So if you earn £65,000 and don't pay into a pension or give to charity, your adjusted net income is £65,000, even though your take-home pay is much lower.
You'll usually only need to think about it if yours is over £60,000. Above that, you may have to pay back some or all of any Child Benefit you or your partner get. Above £100,000, your Personal Allowance starts to shrink and you can't claim .
What does net income mean for a business?
For a business, net income is what's left once all its costs have been taken away from its sales. In UK accounts, you'll usually see this figure labelled net profit. It's often called 'the bottom line', because it's the figure at the bottom of the profit and loss account.
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