Online calculator: How much is your pay rise really worth?

Do you want to know what your inflation-fighting wage increases will really be worth it to you – once income tax and national insurance are deducted?

If, for example, you think that a 10% increase in gross salary is worth 10% of net salary, think again.

Income tax and National Insurance levied in the UK are both progressive, meaning that the percentage taken increases the more you earn. So the net salary increase on a 10% increase in gross salary will generally be smaller the more you earn.

The difference may not be big, but it will be a disappointment if you expect 10%. And, if you’re on a tight family budget, it can make a difference, especially if you’re trying to save a few pounds a week for a particular purchase.

To help you with your sums, FT Money is launching an online calculator this week. Simply enter your gross pay and the percentage increase you’re getting – or hoping for – and the calculator will give you your new net pay.

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You can also use our calculator to calculate the net effects of a pay cut. For example, to see how much you would get if you decided to switch to a four-day week, either by choice or because you were forced to do so by family circumstances or other pressing needs.

For most people, the progressive tax system means that a 20% reduction in gross pay will result in less of a drop in net pay. In addition to a four-day week, you can consider other options, such as a three-day week or taking an extra month of unpaid annual leave.

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Of course, just as a raise depends on an employer, so do most choices for reducing your working hours. Different companies offer different options, and on varying terms. Some even allow employees to take additional leave without imposing the full equivalent drop in salary. Others don’t.

Under 2014 legislation, all employees with 26 weeks of service – not just parents and guardians – have the legal right to request flexible working. It’s known as “make a statutory request”. Employers are required by law to process requests in a “reasonable manner”.

Our calculator is set for UK tax and social security rates. But similar principles apply in most developed countries – progressive tax policies mean that tax is levied at a higher percentage on high incomes than on lower incomes. So, as your gross salary decreases, the marginal tax rate also decreases. And vice versa.

If you’re busy working out your income and budget plans, you might also find it helpful to check out our personal inflation calculator. Launched earlier this year as the cost of living crisis gathered pace, it allows you to enter your personal budget, category by category, so you can determine how quickly your household prices are rising.

This is important because different people spend their money in different ways. Typically, low-income households are currently experiencing higher than average inflation rates because they are spending more money than others on food and energy bills, which have particularly increased.

Wealthier people experienced lower than average inflation because they spent more on items such as clothing, which rose in price less.

But it’s not black and white – the wealthy with big, drafty homes with big heating bills will also have experienced above-average inflation.

Eleanor C. William