A £5,000 pay rise doesn't put £5,000 more in your pocket. If you're in the basic rate band (20% tax + 8% NI), you keep 72% of every extra pound. So a £5K rise gives you roughly £3,600 more per year, or £300/month. Not bad, but not £416/month either.
It gets worse at higher salaries. Cross from £50K to £55K and the extra £5K is taxed at 40% + 2% NI = 42%. You keep only £2,900 of that £5K gross increase (£242/month). And between £100K and £125K, the effective rate is 60%, so a £5K rise only adds £2,000 to your take-home.
| From | To | Gross increase | Monthly take-home gain |
|---|---|---|---|
| £25,000 | £30,000 | +£5,000 | +£300/month |
| £30,000 | £35,000 | +£5,000 | +£300/month |
| £35,000 | £40,000 | +£5,000 | +£300/month |
| £40,000 | £50,000 | +£10,000 | +£596/month |
| £50,000 | £60,000 | +£10,000 | +£483/month |
| £60,000 | £75,000 | +£15,000 | +£725/month |
| £75,000 | £100,000 | +£25,000 | +£1,208/month |
Notice how the monthly gain drops per pound earned as you move up. Going from £40K to £50K gives you £596/month extra, but £50K to £60K only gives £483/month extra for the same £10K increase. That's the higher rate kicking in at £50,270.
Comparing job offers is the most common use. If one role pays £38K and another pays £42K, the £4K difference sounds significant. But after tax, the gap is about £240/month. Whether that justifies a longer commute, worse hours, or less flexibility is something only you can judge. But at least now you know the real number.
It's also useful for negotiation. If your employer offers a £2K raise, you can see that's about £120/month after tax. Knowing the net figure helps you decide whether to push harder or accept.
Want more detail? Use our full salary calculator with student loans and pension, or check what either salary could borrow for a mortgage.