Net vs Gross: Why Your Wage Isn’t What You Think It Is
You accept a job on “£28,000 a year” and mentally divide it by twelve. Then your first payslip arrives and the number is noticeably smaller — not because anything went wrong, but because £28,000 was never the number you were going to be paid.
By the First Wage Editorial Team · Published 18 September 2026 · 10 min read
The Short Answer
Gross pay is your salary before any deductions — the number in your contract and job advert. Net pay is what actually lands in your bank account after Income Tax, National Insurance, pension contributions and (if applicable) student loan repayments are taken out. For most first jobs in the UK, net pay works out to somewhere between 75% and 85% of gross pay, depending on your salary level, pension contribution rate and whether you’re repaying a student loan. Every salary you’re ever quoted — in a job ad, an offer letter, a pay rise — is gross unless someone tells you otherwise.
Why Salaries Are Always Advertised as Gross
Job adverts, contracts and offer letters use gross salary because it’s a fixed, comparable number — it doesn’t change based on your personal tax situation, your pension contribution rate, or whether you have a student loan. Two people on the same £28,000 gross salary can have quite different net pay if one has a student loan and the other doesn’t, or if one pays more into their pension. Gross is the number employers control; net is the number that depends on you.
This is also why comparing job offers purely on the advertised salary can be misleading if the roles have different pension schemes or benefits — the gross figure doesn’t tell you what you’ll actually take home.
What Actually Separates Gross From Net
Four things typically stand between your gross salary and your net pay:
1. Income Tax. For the 2026/27 tax year, the first £12,570 of your income is tax-free (your Personal Allowance). Above that, you pay 20% up to £50,270, then 40% up to £125,140, then 45% beyond. Almost every first job sits entirely within the 20% band, so a simple rule of thumb is: roughly a fifth of everything you earn above £12,570 goes to Income Tax.
2. National Insurance. A separate deduction, charged at 8% on earnings between £12,570 and £50,270 a year, and 2% above that. It funds your entitlement to the State Pension and other contributory benefits.
3. Workplace pension contributions. Unless you’ve opted out, at least 5% of your “qualifying earnings” (the band between £6,240 and £50,270) is deducted automatically and paid into your pension, with your employer adding a minimum of 3% on top — though that part doesn’t reduce your payslip since it’s paid by your employer, not out of your gross pay.
4. Student loan repayments, if applicable — see the worked example below for how much this can change the picture.
Worked Example: £28,000 a Year, Monthly Pay
Here’s what actually happens to a £28,000 gross salary, paid monthly, for someone with a standard tax code, the default 5% employee pension contribution, and no student loan:
- Gross monthly pay: £2,333.33
- Income Tax: approximately £135
- National Insurance: approximately £120
- Pension contribution: approximately £87
- Net monthly pay: approximately £1,991
That’s about 85% of gross. Now add a Plan 2 student loan (2026/27 threshold: £29,385 a year) — at £28,000, you’re actually below the threshold, so no student loan repayment applies yet. But bump the same person up to £34,000 a year, and the picture changes:
- Gross monthly pay: £2,833.33
- Income Tax: approximately £220
- National Insurance: approximately £160
- Pension contribution: approximately £116
- Student loan (9% of the portion above the £29,385 threshold, spread monthly): approximately £35
- Net monthly pay: approximately £2,302
That’s roughly 81% of gross — a meaningfully bigger gap than the first example, purely because of the student loan repayment kicking in.
Why This Trips People Up
Job comparisons. If you’re weighing up two offers, the one with the higher gross salary isn’t automatically the one that pays you more each month — pension contribution rates, benefits, and whether the role is inside or outside a student loan repayment threshold all affect the real comparison.
Payslip shock. Nobody hands you a net-pay figure during the interview process, so the first time most people see their actual take-home number is their first payslip — which is also, confusingly, often a partial pay period (see our guide on your first payday).
Pay rises feel smaller than they are on paper. A £2,000 gross pay rise doesn’t put £2,000 extra in your account over the year — after tax, NI and pension, it’s typically closer to £1,300–£1,500, depending on your tax band and student loan status.
Budgeting off the wrong number. Planning your rent or spending around your gross salary is one of the most common first-job money mistakes — always budget from net pay, not the number in your contract.
How to Work Out Your Own Net Pay
You don’t need to do this maths by hand. HMRC and several independent providers offer free, up-to-date take-home pay calculators that factor in the current tax year’s rates, your student loan plan, and your pension contribution rate. When using one, make sure it’s set to the correct tax year, since thresholds change every April — a calculator using last year’s figures can give you a noticeably wrong answer.
First Wage Takeaway
Every salary you’re ever offered is gross until proven otherwise. Before you accept a job, sign a lease, or plan a budget around a salary number, run it through a take-home pay calculator for the current tax year and work from the net figure instead. It’s a five-minute habit that prevents a genuinely common first-job mistake: overcommitting your money based on a number you were never actually going to receive.
Frequently Asked Questions
Is gross pay before or after pension contributions?
Gross pay is before everything — tax, National Insurance, and pension contributions are all deducted from it to arrive at net pay.
Does my employer’s pension contribution count as part of my gross salary?
No. Your employer’s pension contribution is paid on top of your gross salary and doesn’t appear as a deduction on your payslip, since it never passes through your pay at all.
Why did my net pay change even though my salary didn’t?
Common causes include a new tax year (thresholds and rates change every April), a change in tax code, starting or finishing student loan repayments, or a change to your pension contribution rate.
Is it normal for net pay to be around 80% of gross?
Yes, for most people earning between roughly £20,000 and £50,000 with no student loan, net pay typically lands between 78% and 86% of gross, depending on pension contributions. A student loan or higher pension rate will push that percentage down.