Gross pay vs net pay
The two figures that bookend every UK payslip:
- Gross pay — the total you've earned in the pay period, before anything is taken off. This is the number in your contract.
- Net pay — what's left after deductions: Income Tax, National Insurance, pension contributions, student loan repayments, court orders, and any other items.
The gap between them is usually 20–35% for most UK employees, depending on salary level, tax code, and what's being deducted.
What counts as gross pay
Your gross pay includes:
- Basic salary or wages
- Overtime (often at premium rates like 1.5× or 2×)
- Bonuses and commission
- Holiday pay
- Statutory pay (Sick Pay, Maternity Pay, Paternity Pay)
- Backdated pay following a pay rise
- The cash equivalent value of some benefits in kind, where they're taxable through payroll
Gross pay does not include the value of non-payroll benefits like a company car, private medical insurance, or pension matching from your employer (the employer contribution sits outside your gross pay even though it accrues to you).
How gross pay drives deductions
Almost every payroll deduction is calculated from your gross pay (or a slightly modified version of it):
- Income Tax is calculated on gross pay, less your personal allowance, against the band stack
- National Insurance is calculated on gross pay above the Primary Threshold (£12,570 in 2026/27)
- Pension contributions are typically a percentage of gross pay (the exact base depends on the scheme — qualifying earnings, basic pay, or all pay)
- Student loan repayments are calculated on gross pay above the relevant plan's threshold
The structure of deductions matters: a salary sacrifice pension arrangement reduces your gross pay before tax and NI are calculated, so the saving is bigger than putting the same amount into a relief-at-source pension after tax.
Annual vs period gross pay
UK contracts usually quote an annual gross salary, but your payslip shows the gross for the period you're being paid for:
- Monthly-paid employees: annual gross ÷ 12
- Weekly-paid employees: annual gross ÷ 52
- Variable-hours workers: hours worked × hourly rate, plus any overtime premiums
If your hours vary or you've taken unpaid leave, your gross pay for a given month will deviate from the steady-state figure — and so will your net pay, because all the deductions scale with it.
When gross pay isn't a meaningful number
For someone with significant benefits in kind, salary sacrifice arrangements, or share-scheme income, the headline "gross pay" on a payslip can be a poor representation of what they actually earn from their employer. The HMRC concept of adjusted net income (used for things like the Personal Allowance taper above £100,000) captures more of these adjustments.
For most employees, though, gross pay is a clean number — and the one your mortgage lender will want to see.