Question 1

How much of my pay rise will I actually take home?

Accepted Answer

It depends on your tax band. A basic rate taxpayer (20%) keeps about 68p of every extra £1 after tax (20%) and NI (8%) plus pension. A higher rate taxpayer (40%) keeps about 50p. If the raise crosses the £100k threshold, you could lose your Personal Allowance and keep as little as 32p per £1 in the taper zone.

Question 2

Why is the tax on my raise higher than my overall tax rate?

Accepted Answer

UK income tax is progressive — your raise sits on top of your existing salary and is taxed at your marginal rate. Your overall effective rate is lower because it includes income taxed at 0% (Personal Allowance) and 20% (basic rate). The raise only sees the highest bands your total income reaches.

Question 3

What is the £100k Personal Allowance trap?

Accepted Answer

When your adjusted income exceeds £100,000, your £12,570 Personal Allowance is reduced by £1 for every £2 above the threshold. This creates an effective 60% marginal rate (40% tax + 20% PA loss) between £100k and £125,140. A pay rise that crosses this threshold gives you much less than expected. Increasing pension contributions via salary sacrifice can bring your adjusted income below £100k.

Question 4

Does this calculator account for salary sacrifice pension?

Accepted Answer

Yes. Pension contributions via salary sacrifice are deducted from your gross pay before tax and NI are calculated, for both the current and new salary. This means pension reduces both your tax bill and your NI, but also reduces your net take-home pay. The comparison shows the pension effect on both salaries.

Question 5

Should I negotiate salary or bonus?

Accepted Answer

From a tax perspective, bonus and salary are taxed the same way — both are added to your total income and taxed at marginal rates. However, salary is guaranteed and compounds into future pension contributions, while bonuses are discretionary. Consider that a higher base salary also affects mortgage affordability calculations.

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