Take-home pay

Income Tax is charged on your salary after your Personal Allowance, and after any pension taken before tax. National Insurance is worked out on what you earn each month rather than across the year, because that is how it is actually assessed – so the annual figure here is twelve monthly calculations added together, not one yearly one. The two are not the same: the monthly threshold multiplied by twelve does not equal the annual threshold.

Student loan repayments work the same way and are rounded down to whole pounds each month. A postgraduate loan is repaid on top of any other plan, not instead of it.

• Before tax (net pay) – the contribution comes off before Income Tax, but not before National Insurance.
• Salary sacrifice – you give up the salary itself, so it escapes both Income Tax and National Insurance.
• After tax (relief at source) – the contribution leaves your pay after everything else, and your provider claims basic-rate relief on top, so 80% of it comes out of your take-home.

Above £100,000 the Personal Allowance is withdrawn by £1 for every £2 of income, which is why the band between £100,000 and £125,140 costs more in tax than the rate alone suggests.

Your tax code, if you enter one

A tax code is an instruction to your employer about your allowance, not a rate – so entering one replaces the standard allowance and the taper above £100,000 rather than stacking with them. Someone on £110,000 whose code is still 1257L has £12,570 operated against their pay, because the code is what the employer actually runs.

• 1257L and other number-and-letter codes – the digits are your tax-free allowance with the last zero dropped, so 1257L is £12,570.
• K codes are a negative allowance: the digits are added to your taxable pay rather than taken off it, which is what happens when untaxed income or a benefit is worth more than the allowance.
• BR, D0, D1 charge one rate on everything with no allowance – usually a second job. D0 is not the same rate either side of the border: in Scotland it means the intermediate rate, not the higher one.
• 0T gives no allowance but still runs up the bands. NT is no Income Tax at all.
• A W1, M1 or X on the end means the code is run non-cumulatively. That changes when the tax comes off across the year rather than the total on even pay, so it is read and set aside here.

What this does not cover

It assumes you are paid monthly and that your pay is even across the year. It does not handle the 50% overriding limit that caps the tax a K code can take from one payment, Blind Person's Allowance, Marriage Allowance, a salary that changes part-way through the year, or the higher-rate relief a higher-rate taxpayer claims back on a relief-at-source pension. Pension contributions are taken as a percentage of salary, not of the bonus.

Taxable benefits raise the tax and nothing else: the National Insurance on a benefit in kind is Class 1A and your employer pays it. If your tax code already has the benefit taken out of it – which is the usual arrangement – entering it here as well counts it twice. Use one or the other.

Where these rates come from

Every figure above is read from a dated rate file rather than written into the page, and each entry records the gov.uk page it came from. See Income Tax rates and Personal Allowances, Scottish Income Tax and rates and thresholds for employers on gov.uk. How these numbers are kept right sets out the whole process.