What you keep from a £5,000 pay rise

Why the £100,000 example looks different

In the no-pension, no-loan England, Wales and Northern Ireland example, the £30,000 to £35,000 change produces £3,600.04 more annual cash. The £100,000 to £105,000 change produces £1,900.04. Both are calculated by subtracting the full-year take-home at the starting salary from the full-year take-home at the higher salary.

Under the standard rules, the Personal Allowance reduces as adjusted net income rises above £100,000. That creates an additional effect alongside the tax on the rise itself. Scotland has different employment Income Tax bands. This is why we calculate both salaries fully rather than apply one headline tax rate to the increase. Check the allowance rules on GOV.UK.

Pension money is not lost cash

The pension options are illustrative: 5% employee-funded plus a separate 3% employer addition, both on full reference salary before any salary sacrifice. They are not auto-enrolment minimums. The same percentages apply before and after the raise. Extra employee-funded pension reduces spendable cash but builds pension savings; it must not be counted as tax. Employer additions are outside the £5,000 rise and appear separately in the CSV.

Net pay and salary sacrifice have different payroll treatment. Salary sacrifice needs an employer agreement and cannot take cash pay below the applicable minimum wage; this report does not check eligibility, hours, benefits or affordability. It assumes no employer National Insurance saving is added to the pension. HMRC explains salary sacrifice; compare your own pension settings.

A student loan is a repayment, not another tax

The Plan 2 option models payroll repayments throughout the year, with enough loan balance outstanding. It does not forecast repayment dates, write-off or lifetime borrowing cost. A change in deductions is not necessarily a lifetime saving or loss. For other plans or a postgraduate loan, use the pay-rise calculator.

How to reproduce the figures

1. Choose one of the 12 starting salaries and a tax jurisdiction. Use one full-year employment paid over 12 monthly pay periods, Category A employee NI and the standard Personal Allowance, adjusted for income.
2. Calculate take-home pay with the selected pension and loan assumptions. Recalculate with annual reference salary exactly £5,000 higher, holding the other settings fixed.
3. Subtract the first annual take-home result from the second. Divide the difference by 12 for the monthly average and by £5,000 for the share of the rise kept.

These 144 scenarios are modelled examples chosen to show a range of salaries, including around the allowance reduction. They are not a representative sample, a survey, an estimate of the typical UK raise, or an ONS dataset. The report uses the same calculation engine as the dashboard and pay-rise calculator.

Income Tax is an annual estimate. NI and loan deductions follow the engine’s monthly conventions; loan deductions are rounded down to whole pounds each month. Annual money amounts are compared in pennies. Monthly figures and displayed percentages are then rounded, so multiplying displayed figures can give a small rounding difference. Read the full calculation method and limits.

Excluded: other income, benefits, bonuses, irregular pay, custom tax codes, relief-at-source pensions, childcare, pension tax charges and loan payoff timing. An actual payslip can differ. Automated checks are not independent professional payroll certification.