How we calculate
One calculation engine powers every calculator and salary page. Here’s what goes in, how we work out the result, and where an estimate needs more context.
Tax year 2026-27. Sources checked on 10 October 2026.
What we cover
An annual estimate for one employed earner.
Pay, tax and pensions
Salary and bonus, the personal allowance taper, employee National Insurance, and three pension methods. Income tax uses England, Wales and Northern Ireland bands.
Benefits and childcare
Child Benefit and its income-related charge, plus a simplified estimate of Tax-Free Childcare and England’s working-parent funded hours for children under 5.
Figures cover a full tax year. Monthly amounts are annual figures divided by 12, not a prediction of your next payslip. Pension percentages in the shared form apply to base salary, excluding bonus.
From gross pay to your number
The same steps, whatever question brings you here.
- 1
Start with income
We add annual salary and bonus. Where a calculator collects savings interest or taxable benefits, those feed into the calculation too. Inputs that a form does not collect are not automatically included.
- 2
Work out adjusted net income
Salary sacrifice and net-pay pension contributions reduce the model’s taxable pay. Relief-at-source pension payments and Gift Aid are grossed up before being deducted for adjusted net income (ANI). Savings interest counts towards ANI even where a savings allowance means no tax is due on it.
- 3
Apply the allowance and tax bands
Above £100,000 of ANI, the model reduces the personal allowance by £1 for every £2 of excess income, rounding the reduction down to whole pounds. We apply the tax bands to income after the allowance, with band extensions for gross relief-at-source contributions and Gift Aid.
- 4
Subtract tax and employee NI
Salary sacrifice reduces the model’s pay for both income tax and employee NI. Net-pay pensions reduce income tax but not NI; relief-at-source payments come from taxed pay. Take-home includes modelled pension payments and donations, and savings interest where entered.
- 5
Compare the alternatives
We calculate the household again with the proposed change. The difference gives the tax saved, take-home change and pension added. Child Benefit after its charge and estimated childcare support are shown alongside these amounts.
- HMRC’s adjusted net income guidance
Follow one example
£110,000 salary, no bonus, no existing pension and no children. Compare it with £10,000 of annual salary sacrifice.
These figures come from the same engine as the calculators, using the 2026-27 tax rules.
| Annual figure | Before | After |
|---|---|---|
| Adjusted net income | £110,000 | £100,000 |
| Personal allowance | £7,570 | £12,570 |
| Income tax | £33,432 | £27,432 |
| Employee National Insurance | £4,211 | £4,011 |
| Take-home pay | £72,357 | £68,557 |
| Pension contribution | £0 | £10,000 |
Take-home falls by £3,800 a year; £10,000 goes into the pension. The difference is £6,200 less income tax and employee NI in this model. Pension money is not available to spend now.
Childcare is an estimate of value
It is not extra take-home pay.
Tax-Free Childcare
£2,000
Per child, per year in the default model. The government adds £2 for each £8 paid in, capped at £500 every three months. The full annual top-up needs £10,000 of eligible childcare bills after funded hours, spread across the year.
Funded hours
£8,550
Per child, per year: 1,140 hours × £7.50 assumed value per hour.
The £100,000 test applies to each parent’s expected ANI for the current tax year. Our figures assume the other eligibility conditions are met, including both parents’ minimum earnings, residence and approved childcare. We do not check your partner’s income. Accounts must be reconfirmed every three months; the model does not predict term dates or grace periods.
For children already entitled to England’s universal 15 hours (570 a year), those hours remain above £100,000. Select their number in the form: we exclude their universal hours from the value at risk. At £7.50 an hour, the maximum modelled loss is £10,550 for a younger child or £6,275 for a child with universal hours. These are full-year scenarios, not quotes for your nursery. Disability enhancements and changes of age during the year are not modelled. Reducing annual ANI does not establish entitlement for a past childcare period.
Check the full conditions for Tax-Free Childcare and Free Childcare for Working Parents.
What the result can’t tell you
Use the comparison with these limits in view.
Your exact payslip or tax return
NI assumes a standard category A employee below State Pension age and is calculated annually, while payroll normally works by pay period. Tax codes, in-year changes, payroll rounding, student loans and other deductions are not modelled. The calculator does not cover Scottish income tax, self-employment, dividends, rental income or capital gains. RSU scenarios treat the entered vest value as employment income; they do not model a later share sale.
Whether a pension contribution is available to you
The target is the modelled ANI excess rounded up to a whole pound; monthly sacrifice is that amount divided by 12. We do not enforce pension annual allowances (normally £60,000 including employer contributions), tapering, the money purchase annual allowance, earnings limits or minimum wage rules. Employer agreement, contribution deadlines and any sharing of employer NI savings need separate checking. The main comparison uses salary sacrifice; a personal-pension payment with the same ANI reduction does not have the same NI saving.
A complete household eligibility check
Only one earner is modelled. Child Benefit is estimated using 52 weeks of the configured weekly rates; the charge increases in whole percentage steps across the configured income band. The entered earner is assumed to be the higher-ANI partner liable for the charge. A partner’s income is not assessed. We retain pence for estimates; Self Assessment rounding and partial-year entitlement can differ.
Cash you can spend versus total value
The combined household figure adds take-home, Child Benefit after its charge, and estimated childcare support. A pension comparison’s net gain also includes pension added. Neither figure is all cash in your bank, and pension value is not adjusted for future tax or investment returns.
The exact return on a rise across a boundary
The displayed marginal rate compares the current salary with £1,000 more, including any bands crossed. Existing pension amounts are held fixed. Childcare loss is calculated separately over the same step. Use the pay-rise calculator for a before-and-after comparison of a specific rise.
Whether a past year can be changed
The went-over calculator compares a personal pension or Gift Aid route and flags timing limits. It does not establish that a carry-back claim meets all conditions or that childcare support can be recovered. Check the relevant HMRC conditions before acting.
Sources
The linked parameters were checked against official guidance on 10 October 2026. Worked-example and boundary tests check the implementation. This is not HMRC approval or an independent professional review.
Maintained by Ryan Cassidy. To report an error, email ryan@clearermoney.com with the page and scenario; please omit personal identifiers.
Income tax and personal allowance
National Insurance
Pension tax relief
Savings interest
Gift Aid
Child Benefit and the charge
Childcare
See the working for your numbers.
Start with your pay and pension, then open the working behind the result. Clearer Money provides estimates and explanations, not a personal financial recommendation.