What is PAYE and How Does It Affect My Salary?
If you're an employee in the UK, you've likely seen "PAYE" on your payslip. It stands for Pay As You Earn, and it's the standard system Her Majesty's Revenue and Customs (HMRC) uses to collect Income Tax and National Insurance from your earnings.
How Does PAYE Work?
The concept is simple: instead of you having to calculate and pay your tax bill at the end of the year, your employer does it for you with every payslip.
Each time you get paid, your employer uses your unique tax code (like the standard 1257L) to work out how much tax-free income you're entitled to for that pay period. They then calculate the Income Tax and National Insurance due on the remaining amount and send it directly to HMRC on your behalf.
The money you receive in your bank account is your net pay—your gross salary minus these PAYE deductions. Our UK salary calculator is designed to show you exactly how this is worked out.
Example: A £35,000 Salary
Let's see PAYE in action. Here is the breakdown for someone earning £35,000 a year under the 2025/2026 tax rules.
Take-Home Pay (Annually)
£2,393.30 per month
Gross Salary
£35,000.00
£2,916.67 / month
Total Deductions
£6,280.40
£523.37 / month
Your Personal Allowance
£12,570.00
Tax-free income
Effective Tax Rate
17.94%
Total deductions as % of gross salary.
Deductions Breakdown
As you can see, the employer would deduct a total of £6,296.40 over the year, which is sent to HMRC. The remaining £28,703.60 is your take-home pay.
The Bottom Line
For a "normal employee," being on PAYE is standard. This calculator is built specifically for this system. You don't need to worry about different employment statuses like "Inside IR35" because, under PAYE, the tax calculations are the same.
Just enter your gross annual salary into our advanced calculator, and our tool will do the rest, simulating the exact calculations your employer makes to determine your final take-home pay.