Gross vs net income explained — the difference that matters

Gross income is your total earnings before any deductions. Net income (or 'take-home pay') is what's left after deductions — the amount that actually reaches your bank account.

What's deducted from gross to get net

• Income tax: 20% (basic rate), 40% (higher rate), 45% (additional rate) on income above the personal allowance
• National Insurance: contributions toward state benefits and pension
• Pension contributions: if enrolled in a workplace pension
• Student loan repayments: if applicable, above the income threshold

Why the difference matters for budgeting

Always budget using net income, not gross. A £35,000 salary (gross) translates to roughly £28,000 take-home (net) for most people — a difference of around £580 per month. Budgeting based on the gross figure is one of the most common financial planning mistakes. Our free monthly budget template works from net income.