theluckystrike

National Insurance: the second deduction people forget

UK take-home is cut by both income tax and National Insurance, each with its own thresholds. NI is charged on earnings above the primary threshold and steps down to a lower rate above the upper limit.

Because the two run on different bands, your true marginal deduction at a given salary is income tax plus NI combined — often sharper than the headline tax rate suggests.

Salary sacrifice into a pension reduces both the income taxed and the NI charged, which is why it stretches a pay rise further than taking the cash.

Try it: UKMoneyCalc on national insurance second deduction.