Quick answer
- Gross pay is your pay before deductions.
- Net pay is your pay after deductions and is often called take-home pay.
- The gap between gross and net pay usually comes from PAYE tax, National Insurance, pension contributions and student loan repayments.
- When comparing job offers, always compare both the headline salary and estimated monthly take-home pay.
The simplest way to think about it is this: your job offer, contract or annual salary is usually shown as gross pay. The money that arrives in your bank account is net pay.
Gross pay
The amount earned before payroll deductions. This is the figure often used in job adverts, offer letters and salary negotiations.
Net pay
The amount left after deductions. This is the figure that matters most for monthly budgeting and everyday spending.
Want the number, not just the explanation?
Use the take-home pay calculator to estimate monthly net pay from a gross salary.
What is gross pay?
Gross pay is the amount you earn before deductions are taken off. If your contract says your salary is £35,000 per year, that is usually your gross annual salary.
Gross pay can include basic salary, overtime, bonuses, commission, shift allowance and other taxable employment income. It is the starting point for most payroll calculations.
Examples of gross pay
- A job advert says the role pays £32,000 per year.
- Your payslip shows £2,916.67 as monthly gross pay.
- You earn £18 per hour before tax and deductions.
- Your employer adds a taxable bonus to your normal monthly pay.
What is net pay?
Net pay is the amount left after deductions have been taken from gross pay. This is why net pay is often called take-home pay.
Net pay is the number that helps you plan rent, mortgage payments, bills, food, savings and debt repayments. A salary can look good in gross terms but feel different after deductions.
net pay = gross pay
- Income Tax
- employee National Insurance
- pension deductions
- student loan deductions
- other payroll deductions
What comes off gross pay?
The deductions on a payslip depend on your situation, but most UK employees will see some combination of the following.
| Deduction | What it means | Why it affects net pay |
|---|---|---|
| PAYE Income Tax | Tax collected through payroll. | Reduces take-home pay based on taxable income and tax code. |
| National Insurance | Employee NI deducted through payroll. | Reduces net pay once earnings pass the relevant threshold. |
| Pension contribution | Money paid into a workplace pension. | Can reduce take-home pay, but may also receive tax relief or salary sacrifice benefits. |
| Student loan repayment | Repayments collected through payroll if income is above the plan threshold. | Reduces net pay when you earn over the repayment threshold for your plan. |
| Other deductions | Examples include benefits, payroll giving, attachment of earnings or repayments. | Depends on employer, contract and personal circumstances. |
Example: gross pay vs net pay
Imagine someone has a gross salary of £35,000 per year. Before they receive their pay, payroll may deduct Income Tax, employee National Insurance and pension contributions. The result is a lower net pay figure.
Headline salary before deductions.
Amounts removed through payroll.
Amount received after deductions.
The exact net pay depends on tax code, pension method, student loan plan, region, benefits and other payroll settings. That is why two people with the same gross salary can have different take-home pay.
Where gross and net pay appear on a payslip
Most payslips show gross pay near the earnings section, then deductions, then net pay near the bottom. The wording differs by employer, but the structure is usually similar.
- Earnings section: salary, hourly pay, overtime, bonus or commission.
- Deductions section: PAYE tax, National Insurance, pension and other deductions.
- Net pay section: the final amount paid into your bank account.
- Year-to-date section: cumulative gross pay, tax paid and sometimes NI or pension totals.
Tip: if your net pay looks wrong, check gross pay first, then tax code, pension, student loan plan and any one-off deductions.
Why people with the same salary can have different net pay
Net pay is personal. Two employees can earn the same gross salary but take home different amounts because payroll settings and deductions are different.
- One person may contribute more to a workplace pension.
- One person may have a student loan deduction and another may not.
- One person may have a different tax code.
- One person may be a Scottish taxpayer and use different income tax bands.
- One person may receive taxable benefits, overtime or bonuses.
- One person may use salary sacrifice while another uses a different pension method.
Why gross pay matters for job offers
Gross pay is still important because it is the standard way jobs are advertised and negotiated. It helps compare headline salaries, pay rises, bonuses, overtime and pension contributions.
But gross pay alone does not tell the whole story. A higher salary may come with longer hours, more travel costs, lower pension contributions or weaker benefits. A lower salary with stronger benefits may be better in some situations.
Compare salary by hourly value
Convert annual salary into hourly, daily, weekly and monthly equivalents.
Common mistakes when comparing gross and net pay
- Budgeting from gross salary: monthly spending should be planned from net pay, not headline salary.
- Ignoring pension deductions: pension contributions reduce take-home pay but can improve long-term savings.
- Forgetting student loans: deductions can change once income passes the plan threshold.
- Comparing annual salary only: hours, commute, benefits and pension should also be considered.
- Assuming a pay rise equals cash in the bank: tax and other deductions can reduce the net increase.
Related glossary terms
Learn the payroll terms that usually appear in salary calculations and payslips.
Gross pay vs net pay FAQs
Is gross pay before or after tax?
Gross pay is before tax and deductions. Net pay is after deductions.
Is net pay the same as take-home pay?
Yes. Net pay is commonly called take-home pay because it is the amount paid to you after payroll deductions.
Why is my monthly net pay different from someone on the same salary?
Differences can come from tax code, pension contributions, student loan plan, benefits, region, payroll timing and other deductions.
Should I compare jobs using gross or net pay?
Use both. Gross pay helps compare headline salary and benefits, while net pay shows what you can actually budget from each month.