Gross vs net salary: how to work it out

“How much will I actually take home?” It is the first question that comes up when a job advert quotes a salary or when you check a new payslip. Job offers almost always show the gross salary, but the net salary is the number that matters for your budget. Working out one from the other follows a simple logic, but no single conversion rate applies everywhere. Here is how to estimate it, with the right way to think about the numbers and the traps to avoid.

What is the difference between gross and net salary?

Your gross salary is the headline figure written in your employment contract, before anything is taken off. It is the base on which taxes and social contributions are calculated. Your net salary, often called take-home pay, is what remains once those deductions have been removed. That is the amount your employer actually pays into your account.

In short: gross minus deductions equals net take-home pay. The difference is not lost money in the abstract, it funds income tax, your social protection and, in most schemes, your future pension. It is also worth noting that in many countries your employer pays additional contributions on top of your gross salary (employer National Insurance in the UK, for example). Those employer costs do not appear in your net calculation, but they are part of what it costs to employ you.

What gets deducted from gross pay?

The exact list depends on where you work, but most payroll systems apply the same broad categories. In the United Kingdom, the main deductions from gross pay are:

• Income tax, collected through PAYE (Pay As You Earn). You keep a tax-free Personal Allowance up to a threshold, then pay a rising rate on income above each band. Your tax code tells your employer how much to deduct.
• National Insurance contributions (NICs), which fund the state pension and certain benefits. They apply above an earnings threshold and are your rough equivalent of “social contributions” elsewhere.
• Workplace pension contributions, usually via auto-enrolment. A percentage of your qualifying earnings goes into your pension pot before or after tax depending on the scheme.
• Student loan repayments, if you are above the repayment threshold for your plan, and any other agreed deductions such as salary sacrifice schemes.

Added together, these deductions typically take a meaningful slice out of gross pay, and that slice grows as your salary rises because higher earnings are taxed at higher marginal rates. That is why a percentage that works for one salary will not hold for another.

How do you work out net from gross?

For a quick estimate, you subtract an assumed deduction rate from the gross salary. The logic is always the same:

1. Estimate the deduction rate for income tax plus social contributions (and pension, if you include it) at your salary level.
2. Apply it to gross: net ≈ gross × (1 minus that rate). For example, a 25% total deduction gives net ≈ gross × 0.75.

The catch is that the “right” rate is exactly what you are trying to find, and it depends on your country, your income band, your tax code, your pension contribution and any student loan. Two people on the same gross salary can take home different amounts because of these variables. For a precise figure, the only reliable source is a payslip run through official rates, or a trustworthy salary calculator that uses the current year’s tax tables for your country.

A “universal” gross-to-net conversion rate does not exist: it stays an estimate until the payslip is actually calculated.

Worked examples: gross to net

The table below shows how a quick estimate works. These figures are purely illustrative: they use round assumed deduction rates to show the mechanic, not real tax tables for any specific country.

Illustrative examples (July 2026) using flat assumed rates for teaching purposes only, in your local currency. Real net pay depends on your country’s tax bands, thresholds, pension contributions and personal tax code. Progressive systems apply higher rates to higher earnings, so a single flat rate rarely matches a real payslip.

Why does net pay vary so much by country?

The same gross salary produces very different take-home pay depending on where you are employed, because each country sets its own tax bands, social contribution rates and pension rules. A few reasons the numbers move:

• Different tax structures. Some countries have a high tax-free allowance and steep bands, others tax from the first unit earned. The mix changes the effective rate a lot.
• Different social contribution systems. National Insurance in the UK, social security elsewhere: the rates, ceilings and what they fund all differ.
• Pension arrangements. Whether pension is mandatory, opt-out or voluntary, and whether it is deducted before or after tax, changes your net figure.
• Local specifics such as regional taxes, student loan repayment thresholds, or benefits like Statutory Sick Pay and Statutory Maternity Pay in the UK, which affect pay in particular months rather than the base calculation.

This is exactly why doing the calculation by hand across several employees, or across countries, quickly becomes error-prone. Payroll and HR software recalculates each deduction from the current official rates for the relevant country, which removes the guesswork.