Gross vs Net Pay: What’s the Difference?

Gross pay is what you earn before anything is taken off. Net pay is what actually reaches your bank account after tax, social security contributions and other deductions. On a £35,000 UK salary in 2026/27, gross pay is £35,000 and net pay is about £28,720 a year. On a $75,000 US salary, a single filer nets about $61,593 before state tax.

Gross pay meaning

Gross pay is the full amount your employer agrees to pay you: your salary or hourly wage, plus overtime, bonuses, commission and some allowances. Job adverts, offer letters and pay rises are almost always quoted gross, which is why the number on your payslip’s bottom line looks so much smaller.

For hourly workers, gross pay is hours worked × hourly rate. 37.5 hours a week at £15 an hour is £562.50 a week or £29,250 a year gross.

What is net pay?

Net pay, often called take-home pay, is gross pay minus deductions. Some deductions are compulsory and some you choose:

Deduction	UK	US
Income tax	PAYE income tax (20%, 40%, 45% bands)	Federal income tax (10%–37%), plus state and sometimes local tax
Social security	National Insurance (8% and 2%)	Social Security (6.2%) and Medicare (1.45%)
Retirement	Workplace pension (auto-enrolment)	401(k) or 403(b) contributions
Loans	Student loan repayments	Wage garnishments, if ordered
Benefits	Salary sacrifice schemes (cycle, car, childcare)	Health, dental and vision premiums; HSA/FSA

Gross vs net pay: worked examples

UK, £35,000 salary, 2026/27

• Gross pay: £35,000
• Income tax: 20% on £22,430 above the £12,570 Personal Allowance = £4,486
• National Insurance: 8% on £22,430 = £1,794
• Net pay: £28,720 a year, or £2,393.30 a month

Add a 5% workplace pension through a net pay arrangement and take-home falls to £27,320, but £1,750 goes into your pension and your income tax drops by £350. Run your own numbers with the UK take-home pay calculator.

US, $75,000 salary, single filer, 2026

• Gross pay: $75,000
• Federal income tax on $58,900 taxable income (after the $16,100 standard deduction) = $7,670
• Social Security 6.2% = $4,650; Medicare 1.45% = $1,087.50
• Net pay: $61,592.50 a year, or $2,368.94 per biweekly paycheck, before state and local tax

Try different filing statuses, 401(k) amounts and state rates in the US paycheck calculator.

Why gross and net pay both matter

• Budgeting: always budget from net pay. Rent, bills and savings come out of what you actually receive.
• Borrowing: lenders usually assess mortgages on gross income, but you repay from net. Check that the repayment from the mortgage calculator fits your net monthly pay with room to spare.
• Comparing job offers: compare net pay, not gross, especially across countries, states or different pension and benefit packages. A higher gross salary in a high-tax state can leave you with less.
• Pay rises: a £5,000 or $5,000 rise does not mean £5,000 or $5,000 more in your pocket. Your marginal deduction rate, shown in both calculators, tells you how much of each extra pound or dollar you keep.

Reading your payslip

A payslip or pay stub shows gross pay at the top, each deduction in the middle and net pay at the bottom. Check three things every time:

1. Your tax code (UK) or withholding (US). A wrong code, such as an emergency code after changing jobs, can take too much or too little tax.
2. Year-to-date totals. These should add up across payslips and match your P60 (UK) or W-2 (US) at the end of the year.
3. Voluntary deductions. Make sure pension, benefit and union deductions are what you signed up for.

Frequently asked questions

Is salary gross or net?

Salaries in job adverts, contracts and offer letters are almost always gross, before tax and other deductions.

What is net pay on a payslip?

It is the amount actually paid into your bank account after income tax, National Insurance or FICA, pension contributions and any other deductions.

How do I convert gross to net pay?

Subtract income tax, social security contributions and any pension, student loan or benefit deductions. A take-home pay calculator does this in seconds using the current year’s rates.

Why is my net pay different each month?

Overtime, bonuses, unpaid leave, changes to your tax code or withholding, and pension or benefit changes all affect the deductions taken in a given pay period.

Sources

• GOV.UK: Understanding your payslip
• GOV.UK: Income Tax rates and Personal Allowances
• IRS: Inflation-adjusted tax items by tax year
• Social Security Administration: Contribution and benefit base