Taxes & Your Paycheck
Understand gross pay, net pay, and why a chunk of your money goes to taxes before you ever see it.
Gross vs. net pay
Your gross pay is what you earn before anything is taken out. Your net pay (take-home pay) is what actually lands in your account. The difference is mostly taxes and contributions.
Where the money goes
Depending on where you live, deductions can include:
- Income tax — paid to the government, often in progressive bands.
- Social contributions — fund pensions, healthcare, and unemployment.
- Other deductions — pension contributions, student-loan repayments.
A job advertised at £12 an hour won’t pay you £12 an hour. Always think in terms of net pay when planning a budget.
Tax bands are progressive
In most systems, you don’t pay one flat rate on everything. You pay a low rate on the first slice of income, and a higher rate only on the slices above each threshold. Earning more never means taking home less overall.
Why this matters at 16
Your first part-time job is the perfect time to understand your payslip. Read it. Question the numbers. Knowing what’s deducted — and why — makes you far harder to confuse later.
Key takeaways
- Gross pay ≠ net pay.
- Taxes and contributions explain the gap.
- Progressive bands mean higher rates only on higher slices.
- Read every payslip and understand the deductions.