Take-home pay after all deductions have been subtracted from gross pay.
Net pay is the amount an employee actually receives after all deductions have been taken from gross pay: statutory deductions such as income tax and National Insurance first, then contractual and voluntary deductions such as pension contributions. It is the figure that reaches the bank account, and it is not a number an employer can promise at offer stage, because much of what determines it sits outside the employer's control.
Gross pay is the starting point, but deductions do not all sit at the same point in the calculation, and the position matters more than the amount. Pre-tax items come off before income tax and National Insurance are worked out, so they reduce the pay those charges are applied to. Statutory deductions are taken next. Post-tax deductions come last and change nothing but the bottom line.
The most expensive setup error in payroll is not a wrong amount but a deduction filed in the wrong group. Treat a pension contribution as post-tax when the scheme takes it before tax, and the employee is charged on money they never received: the gross is right, the deduction is right, and the net is still wrong. "The gross looks correct" is not a check on anything.
One terminology trap appears on payslips. A pension "net pay arrangement" has nothing to do with the net pay line; it describes contributions deducted before income tax is calculated. Employees reasonably read it as a statement about their take-home figure, and it is not.
Net pay = (gross pay − pre-tax deductions) − statutory deductions − post-tax deductions. Pre-tax: salary sacrifice and contributions taken before tax. Statutory: income tax, National Insurance, student loan repayments, attachment of earnings. Post-tax: items such as union subscriptions and season-ticket loans.
Both are paid monthly with a contractual gross of £4,000. For 2026 to 2027, Class 1 National Insurance is charged at 8% on monthly earnings from £1,048 to £4,189 and at 2% above £4,189, and the employer takes it from wages before the employee is paid. Neither colleague reaches £4,189, so all of their National Insurance sits in the 8% band.
Employee A has no other deductions, so National Insurance is 8% of (£4,000 − £1,048) = £236.16. Employee B sacrifices £200 a month into a pension and pays a £20 union subscription after tax. The sacrifice cuts the pay National Insurance is charged on to £3,800, giving 8% of (£3,800 − £1,048) = £220.16 — exactly £16.00 less, which is 8% of the £200 sacrificed.
Income tax is deliberately left as a letter in the table. It falls out of the tax code issued for that individual rather than from anything visible in the salary, and it is the largest single reason two people on the same gross take home different amounts.
| Line | Employee A | Employee B |
|---|---|---|
| Contractual gross | £4,000.00 | £4,000.00 |
| Pension by salary sacrifice (pre-tax) | — | £200.00 |
| Pay subject to tax and National Insurance | £4,000.00 | £3,800.00 |
| Class 1 National Insurance, 8% above £1,048 | £236.16 | £220.16 |
| Income tax (set by the tax code) | T(A) | T(B), lower than T(A) |
| Union subscription (post-tax) | — | £20.00 |
| Net pay | £3,763.84 − T(A) | £3,559.84 − T(B) |
The tax code carries what the salary cannot show: allowances and adjustments, tax on untaxed income collected through the code, benefits in kind, an earlier underpayment being recovered, or an emergency code on a starter with no P45. Two people hired on the same day at the same salary can sit on different codes for a year.
National Insurance is charged on each pay period separately rather than cumulatively across the year, so the shape of someone's pay changes the total and not merely its timing. Monthly earnings above £4,189 are charged at 2% rather than 8%, so an employee taking a large bonus in one month has part of the year's earnings charged at the lower rate, while a colleague on the same annual total paid evenly keeps all of it in the 8% band. Income tax on a cumulative code corrects itself across the year; National Insurance does not.
Then come the employee's own choices: pension rates, sacrifice schemes, subscriptions and loans repaid through payroll. The colleague with the lower net pay is often the better rewarded one, because more of the package went into a pension. Net pay is a poor basis for a fairness comparison, which is why offers and pay reviews are quoted in gross.
Payslips must be provided on or before payday. A payslip must show earnings before and after any deductions, and the amount of any deduction that may change each time you are paid — tax and National Insurance being the obvious examples. Where pay varies depending on time worked, the number of hours worked must be shown. Deductions fixed in amount must be explained either on the payslip or in a separate written statement.
That last route is where disputes begin: a deduction explained once, when it was set up, is the one an employee queries months later as something unrecognised.
The check worth running each period is that net pay on the payslip equals the credit reaching the bank. Where it does not, the cause is usually outside the calculation: a reimbursed expense paid in the same transfer, pay split across two accounts, or an adjustment made after the payslip was produced. Correcting the transfer without correcting the payslip leaves the record wrong, and the payslip is the record.
In ordinary use, yes: net pay is the payslip line remaining after every deduction, and take-home pay describes the same amount. The credit reaching the bank can still differ, because things that are not pay — a reimbursed expense, for instance — may travel in the same transfer, and some employers split payment across accounts. Reconcile the payslip to the transfer before concluding the calculation is wrong.
The usual causes are a new tax code, a pension contribution starting or changing, a bonus or overtime month (National Insurance is charged on each pay period separately, so an uneven month does not behave like an average one), a deduction that has just begun, or a benefit being taxed through the payroll. Compare the two payslips line by line: the line that moved identifies the cause, and if it is the tax line, the tax code printed on the payslip usually explains it.
Payslips must be provided on or before payday, and must show earnings before and after any deductions together with the amount of any deduction that may change each time you are paid — tax and National Insurance being the standard examples. Where pay varies depending on time worked, the number of hours worked must be shown. Deductions that are fixed in amount must be explained either on the payslip itself or in a separate written statement.
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