What’s Your Net Income (and Why Care?)
Understanding your net income is the foundation of sound finances. Let's explore what it is, how it's calculated, and why it's crucial for your financial well-being.
Net income, also known as your take-home pay, is the money you actually have available after all deductions. It’s the cash you can spend, save, or invest.
Gross income, on the other hand, is your total income before any deductions. In the UK, that means things like Income Tax, National Insurance, pension contributions, and student loan repayments all get subtracted from your gross pay to arrive at your net income.
Breaking Down Your Deductions
Income Tax: This is what you pay on any income above your Personal Allowance (currently £12,570). This allowance might be higher if you’re claiming Marriage Allowance or Blind Person’s Allowance. If you earn over £100,000, your allowance starts to decrease, and if you’re earning over £125,140, you won’t get a personal allowance at all.
National Insurance (NI): These contributions help you qualify for benefits like the State Pension. You’ll pay NI if you’re over 16, earning more than £184 a week, or if you’re self-employed and making over £6,515 profit a year. The type of NI you pay depends on your employment status and earnings.
Want to figure out your own net income? There are loads of handy take-home pay calculators online. Knowing this number is key to getting a grip on your finances.
Why is Net Income So Important?
Understanding your net income is like having a financial superpower. It helps you see exactly how much you can spend and how much you can save. Budgeting is another great way to see where your money is going.
The Updraft app makes this even easier—helping you track your spending habits, spot areas where you can save, and make smarter decisions about your money.
Boosting Your Disposable Income
Want more wiggle room in your budget? You can increase your disposable income by making small, manageable changes, like switching service providers to save on bills. Those savings can then go towards tackling high credit card debt and the interest that comes with it.
Updraft can help you identify potential savings opportunities and consolidate your debts, freeing up more of your net income (if you’re eligible).
Smart Moves for a Higher Net Income
Got a healthy net income? Consider overpaying on your credit cards—this helps you pay off debt faster and save on interest in the long run.
Updraft offers personalised insights into your credit card debt and can help you create a plan to pay it off faster.
Final Thought
Want to take control of your money? Try our free payment calculator to see how you can manage your finances better. Or, if you’re looking to consolidate credit card debt and cut down on high interest, download the Updraft app today!