What comes off your pay, and how do tax bands work?

In plain words

Your salary offer is the amount before deductions. Tax, pension payments and other deductions come off, so your take-home pay is what lands in your account and what your budget can use. It is like filling a bucket, then removing some water before you carry it. The common mix-up is planning around the quoted salary, which can leave you short when the smaller amount arrives.

Sofia hands her latest payslip to a letting agent who wants proof of her income. It lists her gross pay, each deduction and the net pay that actually lands in her bank account. The agent compares that net figure with the rent, and Sofia signs the agreement for the flat.

You meet this idea when a job offer shows pay before deductions, but your account receives less. It also appears on a payslip, where pension payments, tax and other deductions are taken out before your take-home pay arrives.

Two worked examples

£3,000 a month in England, 2026/27

£2,453.34

Income tax: 20% of pay above the £12,570 personal allowance, £390.50 a month.

National Insurance: 8% of pay above the £1,048-a-month threshold, £156.16.

About 82% of the salary quoted lands, before any pension.

Nigeria

₦500k a month — ₦250k basic, the rest housing and transport: pension 8% = ₦40k; NHF 2.5% of monthly pay (compulsory in the public sector, optional in private jobs) = ₦12,500; s.4 of the Act says monthly income, but s.26 still defines contributions as deductions from basic salary, which would make it ₦6,250.

Tax on the remaining ₦5.37m a year is ₦756,600 (2026 bands, before any rent relief) — ₦63,050 a month.

₦384,450 lands: 77% of the gross.

The common mistake

The mistake: Planning spending around the salary quoted instead of the pay that actually arrives after deductions.

What’s true: Knowing your take-home pay helps you plan spending and saving around the money you can really use. If you budget from the quoted salary, your cash can run out before the month ends.

Only the top slice pays the top rate

Tax bands are marginal: each band taxes only the income inside it, so your effective rate is always below the headline rate.

Hana gets a small bonus on top of her pay, and the last slice of it is taxed at her top rate. Her tax bill at year end still comes to far less than that top rate times everything she earned. The first part of her pay was taxed at lower rates, so the overall share she handed over is smaller.

Tax bands work like steps: each rate applies only to the part of your income on that step. So moving into a higher band cannot, on its own, make take-home pay smaller; only the top slice faces the top rate. A common mix-up is thinking the higher rate applies to all your income, which wrongly makes a pay rise seem harmful.

You meet this idea when a pay rise moves some of your income into a higher tax band. It also appears on a payslip, where different parts of your pay may be taxed at different rates.

2026/27 bands for England, Wales and Northern Ireland: 0% to £12,570, 20% to £50,270, 40% to £125,140 (45% above): on £60,000 the tax is £0 + £7,540 + £3,892 = £11,432 — an effective 19.1%, not 40%.

Nigeria

2026 bands: 0% to ₦800k, 15% to ₦3m, 18% to ₦12m, then 21% to ₦25m, 23% to ₦50m and 25% above.

On ₦5m the tax is ₦0 + ₦330k + ₦360k = ₦690k — an effective 13.8%, not 18%.

Where you’ll meet it

A raise below inflation is a pay cutIf prices rose faster than your pay, the same shopping takes a bigger share of it — the number went up, the pay went down.
Income in; spending and saving outA budget that mixes the three shows money as spent that you still have, or income you never received.
Big bills you can see comingA bill you saw coming, paid from one month's pay, feels like an emergency; spread over the months before, it is just another line.

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Education, not financial advice Source: Theorise lesson and coach text