💡 Due to income tax and NI, a pay rise is worth less than the headline figure. A basic rate taxpayer keeps approximately 68p of every £1 rise. A higher rate taxpayer keeps approximately 52p.
Why a Pay Rise Is Worth Less Than It Looks
When you receive a pay rise, you don't keep all of the additional income. Income tax and National Insurance take a chunk. For a basic rate taxpayer, 20% goes to income tax and 8% to NI — meaning you keep about 72% of the extra pay.
How to Negotiate a Pay Rise
Research the market rate for your role using salary surveys and job listings. Document your achievements and added value. Request a meeting formally and come prepared with specific figures. Be ready to discuss a timeline if an immediate rise isn't possible.
Real Pay Rises vs Inflation
A pay rise below the rate of inflation is effectively a real-terms pay cut. UK CPI inflation has been running at around 2.6–3.3% through 2026 (check the ONS for the latest figure) — any pay rise below the current rate means your purchasing power is still declining in real terms. Use our Inflation Calculator to understand the real value of your wages over time.
Non-Salary Benefits to Consider
When evaluating a compensation package, consider pension contributions, private healthcare, flexible working, professional development budget, share schemes and other benefits that may not appear in the salary figure but have real monetary value.
Frequently Asked Questions
It depends on your tax band. A basic rate taxpayer keeps roughly 72p of each extra £1 (after 20% Income Tax and 8% NI). Above £50,270, the marginal rate rises to about 42% combined; between £100,000 and £125,140 the effective rate is much higher due to the tapering Personal Allowance.
Yes. If you're above your student loan plan's repayment threshold, 9% of your pay rise (6% for Postgraduate Loans) goes toward loan repayments on top of Income Tax and NI, further reducing what you keep.
A percentage rise gives higher earners a bigger cash increase for the same percentage; a fixed cash rise gives everyone the same amount regardless of current salary. Which is 'better' depends on your starting salary and what you're comparing against.
Compare your percentage increase against the current CPI inflation rate (check the ONS or our Inflation Calculator). If your rise is below inflation, your real-terms purchasing power has fallen even though your pay went up in cash terms.
Salary is only part of total compensation. Pension contributions, bonus structure, extra annual leave and other benefits can be worth negotiating alongside — or instead of — a straight salary increase, especially if your employer has limited room on base pay.