Pay Rise Calculator (Real Terms)

When you receive a pay rise, not all of the increase reaches your pocket. The marginal rate of tax and NI on the raise determines how much you actually keep. For example, a basic-rate taxpayer loses 20% to income tax and 8% to NI, keeping 72p of each additional pound. A higher-rate taxpayer keeps only 58p. A 4% rise on £35,000 with no pension contribution illustrates it: the gross increase is £1,400, income tax at 20% takes £280 and employee NI at 8% takes £112, leaving a net rise of £1,008 at an effective marginal rate of 28%.

This calculator takes your current salary and the proposed new salary, then works out the change in take-home pay after 2026/27 income tax, employee NI, your pension and any student loan. It accounts for any threshold crossings, for instance, if the rise pushes you from basic to higher rate, only the portion above £50,270 is taxed at the higher rate. Above that line the marginal rate is 40% income tax plus 2% NI, or 42%, so a £60k earner given a £5k rise nets only £2,900. Crossing £60,000 also brings the High Income Child Benefit Charge, which claws back 1% of Child Benefit for every £200 above the threshold. Sacrificing part of the rise into a pension can recover the net advantage.

The results show your old and new annual take-home pay, the gross increase, the net increase (what you actually keep), the marginal rate of deductions on the raise and the real-terms change after inflation, worked out as (1 + rise) ÷ (1 + inflation) − 1. Where a workplace pension takes a percentage of pay, the rise lifts that contribution too, but the pension is paid before tax: on a move from £38,000 to £42,000, a 5% pension takes £200 of the £4,000 increase, income tax at 20% takes £760 of the remaining £3,800 and NI at 8% takes £320, so the net increase in take-home is £2,720, or 68% of the gross rise. Seeing that figure helps you negotiate with a clear view of the real-world impact.

Some context on what is normal helps too. The CIPD Labour Market Outlook for summer 2026 put the median expected basic pay award for the next 12 months at 3%, the same across the private, public and voluntary sectors. To maintain purchasing power the rise needs at least to match inflation, and CPI was 3.1% in the 12 months to August 2026 (ONS), so a 3% award is a small real-terms cut. The calculator uses 3.1% by default; change it if you want to test a different forecast. The best moments to negotiate are the annual review, a change of role and the aftermath of a major project success.

Preparation wins pay negotiations. Document your impact in terms of revenue generated, cost saved, projects delivered and any awards or recognition. Research the market rate on Glassdoor, LinkedIn Salary, Indeed and professional body surveys. Pick the timing carefully: after a positive review, after a success, or during fiscal year planning between September and January. Be specific, for example asking for a salary aligned with your role and the market in the £40,000 to £45,000 range. Avoid threatening to leave unless you are prepared to, although counter-offers are typical and around 70% of 'I have been offered elsewhere' conversations end in a 10-15% raise. Get any rise in writing.

Cash is one lever among several. A 5% employer pension match on £40k is £2,000 a year free of tax and NI. A basic-rate taxpayer on £40k keeps 72p of each extra pound, so it would take a gross pay rise of about £2,780 to match, and for a higher-rate taxpayer keeping 58p it would take about £3,450. Private medical insurance is worth £400-£1,200, taxed as a benefit in kind at 20-45%. An EV through salary sacrifice saves a higher-rate taxpayer 30-50%. Bonus, shares and commission average 10-30% of base salary in mid-management. Holiday above the 28-day statutory minimum, with 30 or more days, is a valuable benefit, and flexible or home working is hard to price but can be worth £5-£15k a year in commute savings and quality of life.

Pay rises compound. Starting at £35,000, a 4% annual rise over 30 years ends at £113,500, while 2.5% a year ends at £73,000, a gap of £40k or more a year by the end of a career, and pension contributions on the higher salary compound in the same way. Negotiate at least every 2-3 years, because every percentage point matters over the long run. Switching jobs typically brings a 15-25% rise against 3-5% for an internal one, and a move every 4-5 years is about the optimal frequency for career-stage changes. The salary at the end of a career often determines how comfortable retirement is.