What a 3% Pay Rise Is Really Worth in 2026/27

A 3% pay rise reads well on paper. On a GBP 35,000 salary that is an extra GBP 1,050 a year. But the figure that lands in your account is smaller, because income tax and National Insurance take a slice of every additional pound. This guide shows what a typical 2026/27 raise is really worth.

The headline versus the take-home

In 2026/27 a basic-rate taxpayer pays 20% income tax and 8% employee National Insurance on earnings between GBP 12,570 and GBP 50,270. That is a combined 28% on the margin, so you keep 72p of every extra pound.

A higher-rate taxpayer earning above GBP 50,270 pays 40% income tax and 2% National Insurance on the next slice, keeping just 58p in the pound.

Worked example: a 3% rise on GBP 35,000

Take someone on GBP 35,000 receiving a 3% increase to GBP 36,050, a gross uplift of GBP 1,050.

• Extra income tax at 20%: GBP 210
• Extra employee National Insurance at 8%: GBP 84
• Net increase: GBP 756 a year, or about GBP 63 a month

So a GBP 1,050 headline raise becomes GBP 756 in your pocket. That is the 72% keep rate in action. Both the old and new salary sit comfortably inside the basic-rate band, so the maths stays clean.

Why frozen thresholds matter

The Personal Allowance is GBP 12,570 and the higher-rate threshold is GBP 50,270. Because these figures are frozen rather than rising with wages, repeated pay rises gradually push more of your income into tax. This effect is often called fiscal drag.

If your raise straddles the GBP 50,270 higher-rate threshold, the portion above it is taxed at 40%, so your blended keep rate falls. Someone moving from GBP 49,500 to GBP 51,000 keeps 72p on the first GBP 770 and only 58p on the GBP 730 above the threshold.

Watch the danger zones

A pay rise is almost always worth taking, but two points distort the picture:

• Between GBP 100,000 and GBP 125,140 the Personal Allowance is withdrawn at GBP 1 for every GBP 2 earned, creating a 60% effective tax rate.
• Above GBP 100,000 you lose access to Tax-Free Childcare and the 30 hours of funded childcare, which can outweigh the raise for some families.

For most workers below GBP 50,270, none of this applies and the 72% keep rate holds.

Inflation: the real-terms test

A nominal 3% rise only protects your living standards if prices rise by less than 3%. If inflation runs at 3%, your buying power is flat in real terms even before tax. To stay ahead, the after-tax increase needs to beat the cost of the goods and services you actually buy.

Quick reference

• Basic-rate keep rate on a raise: 72%
• Higher-rate keep rate on a raise: 58%
• Personal Allowance: GBP 12,570 (frozen)
• Higher-rate threshold: GBP 50,270 (frozen)
• 60% trap: GBP 100,000 to GBP 125,140

To see exactly what your new salary delivers, run both your old and new figures through the CalcHub take-home pay calculator, and confirm the current rates and thresholds on gov.uk.