How to Calculate PAYE on Your Salary (2026 Guide)

How do you calculate PAYE on your salary?

The calculation has five steps, and it is the same shape in every country that uses PAYE — only the numbers change:

1. Start with your gross pay for the year. Use your annual salary before any deductions — for monthly pay, multiply by 12 first.
2. Subtract your personal allowance. In the UK for 2026/27 that is £12,570 of tax-free pay. What is left is your taxable income.
3. Split the taxable income across the income tax bands. Each slice of pay is taxed only at the rate for its own band — never at your highest rate on the whole salary.
4. Add National Insurance separately. It is charged at 8% of pay between £12,570 and £50,270, then 2% above £50,270.
5. Divide by 12 for the monthly deduction. That is the figure your employer should be taking from each month's pay.

These thresholds are frozen — the allowance has stayed at £12,570 since 2021 — so the same bands apply for 2026/27. Scotland sets its own six-band system with a 19% starter rate and a 48% top rate, while using the same £12,570 allowance. And if you earn over £100,000, your personal allowance shrinks by £1 for every £2 above that limit, disappearing entirely at £125,140. Run your own numbers in the free UK Salary Calculator if you want the machine to do steps 1 to 5 for you.

Worked example: how much PAYE on a £35,000 salary?

Take a UK employee earning £35,000 a year, paid monthly, on the standard 1257L tax code, with no pension or student loan deductions:

1. Gross pay: £35,000 a year (£2,916.67 a month).
2. Taxable income: £35,000 − £12,570 = £22,430.
3. Income tax: all £22,430 sits in the basic-rate band, so £22,430 × 20% = £4,486 a year, or £373.83 a month.
4. National Insurance: (£35,000 − £12,570) × 8% = £1,794.40 a year, or £149.53 a month.
5. Take-home pay: £35,000 − £4,486 − £1,794.40 = £28,719.60 a year (£2,393.30 a month).

Notice the marginal rate here is 20% — every extra pound earned is taxed at 20% — but the average income-tax rate is only about 13% of gross pay, because the first £12,570 is tax-free. That gap is exactly why you should never estimate your net figure from your top rate alone. For the same maths at any salary, see our Payroll Calculator Guide.

Worked example: how much PAYE on a £60,000 salary?

At £60,000 the calculation crosses into the higher-rate band, which shows why the bands matter — only the slice above £50,270 is taxed at 40%:

1. Taxable income: £60,000 − £12,570 = £47,430.
2. Basic-rate slice: £37,700 (£50,270 − £12,570) × 20% = £7,540.
3. Higher-rate slice: £9,730 (£60,000 − £50,270) × 40% = £3,892.
4. Income tax: £7,540 + £3,892 = £11,432 a year, or £952.67 a month.
5. National Insurance: £37,700 × 8% = £3,016, plus £9,730 × 2% = £194.60, giving £3,210.60 a year, or £267.55 a month.
6. Take-home pay: £60,000 − £11,432 − £3,210.60 = £45,357.40 a year (£3,779.78 a month).

The marginal rate is now 40%, but the average income-tax rate is only about 19% — the 40% slice is just £9,730 of the £60,000. A pay rise that pushes you into the higher-rate band never makes you worse off: only the pay above £50,270 is taxed at 40%, and you keep 60% of every extra pound.

How much tax do I pay on R8,000 per month?

This is one of the most-typed South African salary questions, and the answer surprises most people: on R8,000 a month you pay no PAYE at all. Here is why. R8,000 a month is R96,000 a year. To calculate PAYE in South Africa, SARS applies its brackets to the annual figure, then subtracts the primary tax rebate:

1. Annual pay: R8,000 × 12 = R96,000.
2. Tax before rebates: R96,000 × 18% = R17,280.
3. Less the primary rebate: R17,280 − R17,820 = less than zero, so PAYE is R0.
4. UIF still applies: 1% of R8,000 = R80 a month, so net pay is R7,920 a month.

The tax rebate creates a tax-free threshold: anyone under 65 pays no income tax on annual earnings up to R99,000 (R8,250 a month), because 18% of R99,000 is exactly R17,820. People aged 65 and older get a further rebate, lifting their threshold to R153,250. Our South Africa Salary Guide works through a full R600,000 example, and the South Africa Salary Calculator runs the same SARS maths for any salary.

How does PAYE differ from National Insurance?

They are deducted side by side, but they are two different deductions with different rules:

The practical difference: National Insurance is calculated on each pay period on its own, while PAYE looks at the whole tax year — so a bonus month can push your PAYE up sharply while the second deduction rises only slightly. Your employer also pays 15% on your earnings, but that is an employer cost and never appears on your pay statement.

What is a tax code and how does it change your PAYE?

Your tax code tells your employer how much tax-free pay to give you before applying the bands. The most common code is 1257L: multiply 1257 by ten and you get the £12,570 personal allowance. HMRC issues the code, and your employer applies it — if the code is wrong, your PAYE is wrong, even when the bands are right.

PAYE is normally calculated on a cumulative basis: each month your employer looks at your total pay and total tax-free allowance for the year so far, so an overpayment in one month is corrected automatically in the next. But a new starter without a P45 is often put on a Week 1 / Month 1 basis instead — each pay period is taxed in isolation, with only one twelfth of the allowance. That, and an emergency tax code such as 1257L W1, is why a first payslip can show far too much tax. The fix is to check the code in your personal tax account on GOV.UK and give your employer your P45; once the correct code is applied, the overpaid tax comes back through your pay.

Do pension contributions and salary sacrifice change PAYE?

Yes — and this is the one legal way most employees can lower their PAYE. Pension contributions taken from pay before tax reduce the figure the bands are applied to: if you earn £3,000 a month and put £200 into a workplace pension, your income tax is calculated on £2,800, not £3,000. Salary sacrifice works the same way — you give up part of your salary in exchange for a benefit, and PAYE is charged on the lower figure. Both also reduce the second deduction, which is why employers like it.

A student loan is different: it is deducted after tax, so it does not reduce your PAYE bill at all. It appears as its own line, separate from the PAYE line, and it stops once the loan is repaid or your income falls below the repayment threshold.

How do you check your PAYE is correct?

Work through these five checks whenever your pay looks wrong:

• Read the code first — your payslip shows your tax code. If it ends in W1, M1 or X, or it is not the code you were given, that is usually the whole problem.
• Check the gross figure — confirm the gross figure matches your salary for the period, including any overtime or bonus, before you check the tax.
• Re-run the five steps — apply the allowance and the bands to your annual pay, add the second deduction, then divide by 12 and compare with the statement.
• Compare with a calculator — run the same salary through the free salary calculator and see whether the two answers agree.
• Check the year to date — your P60 at the end of the tax year shows total pay and total tax. If the year-to-date tax is higher than the five-step maths says, ask your payroll team to check the code, and HMRC can correct it.