A pay rise rarely delivers what it says on paper. Income Tax and National Insurance take a slice of every extra pound — sometimes more than half. Here's exactly what you keep at every salary level.
Last updated: April 2026 · Written by the EasyCalculators team
When people say "I'm a 40% taxpayer" they mean their marginal rate — the rate on their next pound of income. But their effective rate — the percentage of their total income paid in tax — is always lower, because the lower bands are taxed first.
Understanding the marginal rate is what matters when you get a pay rise: it tells you how much of every extra pound you actually keep.
| Current salary | You keep per extra £1,000 | Why |
|---|---|---|
| Under £12,570 | £920 | Only NI (8%) applies, no IT |
| £12,571 – £50,270 | £720 | 20% IT + 8% NI = 28% gone |
| £50,271 – £100,000 | £580 | 40% IT + 2% NI = 42% gone |
| £100,001 – £125,140 | £400 | 60% effective rate — the trap |
| £125,141 – £150,000 | £530 | 45% IT + 2% NI = 47% gone |
| Over £150,000 | £530 | 45% IT + 2% NI = 47% gone |
Most UK workers sit in this range, where Income Tax is 20% and National Insurance is 8% — a combined 28% on each extra pound. On a £2,000 pay rise, you take home £1,440. Not quite half, but close to three-quarters.
Example: Sarah earns £32,000 and gets a £3,000 pay rise to £35,000. She keeps £3,000 × 72% = £2,160 of it as take-home pay. Her monthly take-home increases by £180.
Once your salary exceeds £50,270, additional income is taxed at 40% instead of 20%. Combined with 2% NI (which drops at this threshold), your marginal rate becomes 42%. You keep 58p of each extra pound — not 72p.
Example: James earns £48,000 and is offered a £5,000 pay rise to £53,000. The calculation is:
A pay rise that sounds transformative delivers something more modest once tax is applied. This isn't a reason to refuse a pay rise — it's still money — but it explains why a £5,000 raise doesn't feel like £5,000.
This is the most expensive corner of the UK tax system and affects an increasing number of workers as wages rise.
Once your income exceeds £100,000, your Personal Allowance (£12,570) is reduced by £1 for every £2 of income above £100,000. By £125,140, the Personal Allowance is completely gone. This creates an effective marginal rate of 60% on income between £100,000 and £125,140 — higher than any other band, including the top rate.
Here's why: a £2,000 pay rise from £102,000 to £104,000:
Combined with 2% NI, you keep just £760 of every £2,000 pay rise in this range.
If your salary is between £95,000 and £125,140, pension contributions are the most powerful tool available to you. Every pound you contribute to your pension reduces your "adjusted net income" — the figure used to calculate Personal Allowance withdrawal.
Contributing enough to bring your adjusted net income below £100,000 can save thousands of pounds in tax. A higher-rate taxpayer who contributes £6,000 into their pension to stay below £100,000 effectively pays only £2,400 for that £6,000 pension deposit — a 60% reduction in cost, thanks to the combined effect of tax relief and Personal Allowance restoration.
In theory yes — if it tips you into a benefit withdrawal zone or a threshold where your effective rate spikes. In practice, this is rare for most workers. The main real-world case is the £100,000 trap, where a modest pay rise from just below to just above £100,000 can result in a significantly higher tax bill that makes the net take-home increase tiny.
For most people below £100,000, a pay rise always increases take-home pay — just not by as much as the headline number suggests.