Online calculator: how much is your pay rise really worth?

Do you want to know what your inflation-fighting pay rise will actually be worth to you — once income tax and national insurance have been deducted?

If, for example, you think a 10 per cent increase in gross pay is worth 10 per cent in take-home pay, think again.

Income tax and national insurance levied in the UK are both progressive — meaning the percentage take goes up the more you earn. So the net salary increase on a 10 per cent boost to gross pay will generally be smaller the more you earn.

The difference may not be great — but it will be a disappointment if you are expecting 10 per cent. And, if you are running a tight household budget, it may make a difference, especially if you are trying to save a few pounds a week for a particular purchase.

To help you with your sums, FT Money is this week launching an online calculator. Just input your gross salary and the percentage increase you are getting — or hoping for — and the calculator will give you your new net pay.

You can also use our calculator to work out the net effects of a reduction in pay. For example, to see how much you would be getting if you went down to a four-day week, either by choice or because you were forced to do so by family circumstances or other pressing needs.

For most people, the progressive tax system means that a 20 per cent reduction in gross pay will deliver a smaller decline in net pay. As well as a four-day week, you can consider other options, such as a three-day week or taking an extra month’s annual leave — unpaid.

Of course, just as a pay rise depends on an employer, so do most choices of reducing your working hours. Different companies offer different options, and on varying terms. Some even allow employees to take some extra leave without imposing the full equivalent pay cut in full. Others don’t.

Under 2014 legislation, all employees with 26 weeks’ service — not just parents and carers — have the legal right to request flexible working. It’s known as “making a statutory application”. Employers are required by law to deal with requests in a “reasonable manner”. 

Our calculator is set for UK tax and social security rates. But similar principles apply in most developed countries — progressive fiscal policies mean that tax is levied at a higher percentage on higher incomes than on lower ones. So as your gross pay goes down, so does the marginal tax rate. And vice versa.

If you are busy working out your income and budget plans, you might also find it helpful to look at our online personal inflation calculator. Launched earlier this year, as the cost of living crisis was gathering pace, this allows you to input your personal budget, category by category, so you can work out how fast your household prices are rising.

This matters because different people spend their money in different ways. Generally, lower-income households are seeing higher-than-average inflation rates right now because they spend more of their money than others on food and energy bills, which have risen particularly strongly.

Wealthier people have experienced lower-than-average inflation because they spend more on items such as clothes, which have gone up less in price.

But it’s not black and white — rich people owning big, draughty homes with big heating bills will also have seen higher-than-average inflation.


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