Website of the UK government

Gross and net salary

The amount you earn before tax is deducted is your 'gross salary'. The amount you get after tax and National Insurance has been deducted is your 'net salary'. When you get a payslip, you'll see:

As well as being taxed on your pay, you're also taxed on benefits your employer provides, such as a company car, a low interest loan or medical insurance. You may also have to pay tax on tips you receive as part of your job.

• More about tax on company benefits (opens new window)
• Tax on tips and gratuities (opens new window)
• Help with PDFs

Income Tax

Income Tax is your contribution to government spending on things like transport, health and education. How much you pay depends on how much you earn.

HM Revenue & Customs (HMRC) gives you a 'tax code', which you'll see on your payslip. Your employer uses your tax code to work out how much Income Tax to take off your wages through the PAYE system.

At the end of each tax year your employer will give you a form - your P60 - showing your total gross pay for the year and how much tax you've paid.

• More about Income Tax
• Your tax code explained

National Insurance Contributions (NICs)

You pay National Insurance Contributions (NICs) to build up your entitlement to a State Pension and other social security benefits. How much you pay depends on how much you earn. Your employer deducts Class 1 NICs from your wages through the PAYE system.

HMRC keeps track of your contributions through your National Insurance number. This is like an account number and is unique to you.

• National Insurance contributions

How much can you earn without paying tax and National Insurance?

Income Tax

Everyone can earn a certain amount each year without paying any Income Tax. This is called your 'personal allowance'. In 2008-2009 the personal allowance is £5,435. Some people can earn a bit more before they start paying tax, if they're over 65, for example.

• Personal allowances

National Insurance

You can earn up to £105 a week (2008-2009) before you pay any National Insurance Contributions. This is known as the 'primary threshold'.

As long as you earn more than £90 a week (2008-2009) you can still build up your entitlement to a State Pension and certain other benefits. This is known as the 'lower earnings limit'.

More useful links

• Understand tax paperwork when you start your first job
• More about paying tax when you're an employee (opens new window)
• Answers to common questions about PAYE (opens new window)