What is my monthly income?
Understanding your monthly income is more than a matter of curiosity—it's a crucial step towards financial literacy. Whether you're planning a budget, saving for a dream vacation, or preparing for unforeseen expenses, knowing exactly how much money you have coming in each month is essential. It’s also helpful to know so you can make sure you are getting paid correctly! This guide will walk you through the process of calculating your monthly income in the UK, considering various income sources and the nuances of taxation.
Identify Your Income Sources
The first step in calculating your monthly income is to identify all your income sources. For most people, this will primarily be earnings from employment or self-employment. However, don't overlook other potential sources of income, which might include:
Rental income
Dividends from investments
Interest from savings
Pensions
Benefits and allowances
Any other form of regular income
Once you know all of your income sources, list out how much money you receive from these on a monthly basis before any taxes or other deductions.
- Your gross monthly income is your salary before any deductions (tax, NI, pension, etc).
- Annual Salary Method:
Divide your annual salary by 12.
Example: £40,000 per year / 12 = £3,333 per month - Hourly Wage Method:
Multiply your hourly wage by your weekly hours, then by 4.3 (average weeks in a month).
Example: £19.87 × 39 × 4.3 = £3,333 per month
- Income calculation is trickier due to fluctuating earnings and expenses.
- First, estimate your annual net income (your profit after business expenses).
- Divide this figure by 12 to estimate your average monthly income.
- Review your income regularly and keep records—your monthly amount may change over time.
| Salary from main job | 1500 |
| Salary from second job | 200 |
| Rental Income | 200 |
| Total Income | 2,200 |
See Your True Take Home Pay
Want to know exactly how much money you’ll have in your pocket after tax, pension, and National Insurance?
Try our free, easy-to-use Take Home Salary Calculator and plan your budget with confidence.
Deductions: Understanding Tax and National Insurance
Now that you’ve listed all of your income sources, the next step is to remove any tax that is due. The UK tax system can seem daunting, but it's crucial to understand how it affects your take-home pay. There are two main types of tax on UK income: Income Tax and National Insurance Contributions (NICs).
Income Tax
You're taxed on your income over a certain threshold. For the 2023/24 tax year, the personal allowance is £12,570, meaning you don't pay tax on income below this amount. Beyond this, income tax rates are applied progressively, depending on your total taxable income. Here’s how you can calculate income tax for an income of £60,000:
-
Personal AllowanceIncome: £12,570
Tax: £12,570 × 0% = £0 -
Basic RateIncome: £50,270 − £12,570 = £37,700
Tax: £37,700 × 20% = £7,540 -
Higher RateIncome: £60,000 − £50,270 = £9,730
Tax: £9,730 × 40% = £3,892
| Band | Taxable Income | Tax Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic Rate | £12,571 to £50,270 | 20% |
| Higher Rate | £50,271 to £125,140 | 40% |
| Additional Rate | Over £125,140 | 45% |
National Insurance Contributions (NICs)
NICs are the second main tax deduction to consider. These contributions fund various state benefits, including the State Pension. The rate you pay depends on your earnings and employment status.
(Example: £60,000 Salary)
| Earnings Band | NI Rate |
|---|---|
| Up to £12,570 | 0% (No NI contributions) |
| £12,570 to £50,270 | 12% |
| Over £50,270 | 2% |
Other Deductions
Consider other deductions that may apply to your situation, such as:
- Plan 2: For students who started undergraduate courses on or after 1 September 2012
- Repayment Threshold: £27,295 per year (2023-2024 tax year)
- Repayment Rate: 9% of income above the threshold
If you earn £30,000:
Income above threshold: £30,000 - £27,295 = £2,705
Repayment: 9% of £2,705 = £243.45 per year
- Auto-enrolment: Government requires eligible employees to be automatically enrolled into a workplace pension with contributions from both employee and employer, plus tax relief from the government.
- Eligibility: Employees aged 22 to State Pension age, earning over £10,000 a year, working in the UK.
- Minimum Total Contribution: 8% of qualifying earnings (split between employee, employer, and government tax relief).
Qualifying earnings = £30,000 - £6,240 = £23,760
- Employer's contribution: 3% of £23,760 = £712.80/year
- Employee's total contribution: 5% of £23,760 = £1,188/year (includes 1% tax relief)
- Employee's actual contribution: 4% of £23,760 = £950.40/year
- Government tax relief: 1% of £23,760 = £237.60/year
- Total annual contribution to pension: £1,900.80
- Health insurance premiums
- Company car contributions
- Cycle to work scheme
- Trade union or professional fees
- Charitable donations (via payroll giving)
- Childcare vouchers
- Court orders or attachment of earnings
- Season ticket loans
Subtract these from your gross monthly income to refine your net income estimate further.
Summary
Calculating your monthly income in the UK involves more than a simple equation. It requires an understanding of your income sources, the tax system, and any other deductions. By taking the time to accurately calculate your monthly income, you empower yourself with the knowledge needed to make informed financial decisions, plan for the future, and achieve your financial goals. Remember, personal finance is just that—personal. Tailor these guidelines to fit your unique situation and consult with a financial advisor if you have complex income streams or tax situations.