How to Convert Hourly Rate to Annual Salary
To convert an hourly rate to an annual salary, multiply the hourly rate by the number of hours you work per year. At 40 hours/week, that's 2,080 hours/year (52 weeks × 40 hours). A £20/hour job becomes £20 × 2,080 = £41,600 gross — before tax and National Insurance.
But here's the catch: that £41,600 is not what you'll take home. Between income tax, National Insurance, pension contributions, and possibly student loan repayments, the gap between gross and net can shock you on payday. This guide shows you exactly how to convert hourly rates to annual salary and what your actual take-home will be — so you're not caught off-guard when comparing job offers or switching from hourly to salaried work.
The Simple Formula: Hourly to Annual
The maths is straightforward.
Hourly rate × hours per year = annual gross salary
Most UK full-time contracts assume 40 hours/week, which equals:
- 40 hours/week × 52 weeks = 2,080 hours/year
So a £18/hour job × 2,080 = £37,440/year gross.
If you work part-time (say, 30 hours/week), adjust the multiplier:
- 30 hours/week × 52 weeks = 1,560 hours/year
A £15/hour part-time role = £15 × 1,560 = £23,400/year gross.
A note on weeks: Most employers count 52 weeks, though some use 52.14 to account for leap years. For a quick annual salary calculation, stick with 52. The difference is negligible.
Real Examples: UK and US
UK example: Converting £18.27/hour to annual salary
You're offered a £38,000 salaried role. Currently you're on £18.27/hour. Here's the conversion check: £18.27/hour × 2,080 = £37,982/year (roughly £38k) ✓
But what you actually take home is very different. On a £38,000 gross salary in the UK (using current 2026 tax bands):
- Income tax: £5,086 (no tax on first £12,570; 20% on the next £25,430)
- National Insurance: £2,024 (8% on earnings between £12,570–£50,270)
- Take-home: £30,890/year, or £2,574/month
Most salaried roles include a workplace pension (typically 5–8%). If your new salary includes a 5% pension contribution (£1,900/year), your take-home drops to £28,990/year, or £2,416/month. But your employer is also contributing 3–5% to your pension on your behalf — that's free money never appearing on your payslip. So the real value of the role is higher than your take-home suggests.
The takeaway: Don't compare hourly and salaried offers on gross figures alone. Always convert to take-home.
US example: Converting $22/hour to annual salary
A $22/hour job (typical for mid-level roles) × 2,080 hours = $45,760/year gross.
What you'll take home (2026 rates, single, no state tax):
- Federal income tax: ~$4,100
- Social Security (6.2%): $2,837
- Medicare (1.45%): $663
- Take-home: ~$37,160/year, or $3,097/month
Add state income tax — and it drops further. A $45,760 salary in California loses roughly 9–10% more to state tax, dropping your take-home to ~$3,000/month or less.
US tip: When comparing offers across states, factor in state income tax. A "higher" salary in a high-tax state might be worth less in your pocket than a lower offer in a low-tax state.
What Shrinks Your Payslip: The Big Deductions
Pension contributions reduce your gross taxable income, which actually works in your favour. If you contribute 5% to a workplace pension on a £38,000 salary, that's £1,900 from your payslip. But because pensions reduce your taxable income, you save 20% in income tax: £380. So the pension costs you £1,520 net — a genuine 20% discount from the government.
Student loan repayments (UK Plan 2) are 9% of everything above £27,295. On a £38,000 salary, that's £960/year (£80/month). They feel like tax but aren't — they're eventually written off after 30 years, and if you move into lower-paid work, your repayments drop automatically.
Salary sacrifice schemes (childcare vouchers, cycle to work, electric cars) are a hidden tax-break. If you contribute £5,000/year to a nursery scheme via salary sacrifice, your gross pay becomes £33,000 instead of £38,000. That saves you:
- Income tax: £1,000 (20% of £5,000)
- National Insurance: £400 (8% of £5,000)
- Total: £1,400 saved
A £5,000 benefit costs you only £3,600 from your payslip — a 39% discount you won't get in cash compensation.
Bonuses and overtime are taxed at your marginal rate, not a special rate. If you earn a £3,000 bonus on a £38,000 salary, it's taxed at 20% (income tax) + 8% (National Insurance) = 28%. If a bonus pushes you over £50,270, the portion above that threshold is taxed at 40% (higher rate) instead of 20% — the marginal rate jumps to 48%. See how this works with our tax calculator.
Converting Back: Annual Salary to Hourly Rate
You might need the reverse: what's your effective hourly rate from a salary?
Annual salary ÷ hours per year = effective hourly rate
On a £38,000 salary ÷ 2,080 hours = £18.27/hour gross.
But your effective take-home rate is more useful:
Take-home pay ÷ hours per year = effective hourly rate (net)
£30,890 take-home ÷ 2,080 hours = £14.85/hour net (after all deductions).
That's the figure you should use when comparing hourly jobs to salaried roles.
Using Real Numbers to Negotiate and Compare
When comparing two job offers — say, one salaried at £42,000 and one at £40,000 — most people pick the higher number. But both might include pension, health insurance, or flexible working, which have real financial value. Check our guide on comparing job offers for the full framework, but here's the quick version:
Offer A: £42,000 + 5% pension + private health
- Take-home pay: £31,590/year
- Pension contributions (yours + employer): £4,200/year
- Estimated taxable benefit value (private health): ~£1,500/year
- Effective value: ~£37,290
Offer B: £40,000 + 3% pension + no extras
- Take-home pay: £29,990/year
- Pension contributions: £2,000/year
- Effective value: ~£31,990
Even though Offer B is £2,000 lower, Offer A is worth £5,300 more when you include the pension and health cover. Use our salary calculator to run both scenarios — it shows your exact take-home figures once you factor in your personal tax band, student loans, and other variables.
Watch the £100,000 cliff edge. UK earners between £100,000–£125,140 face a 60% marginal tax rate (they lose £1 of personal allowance for every £2 earned above £100k). A £105,000 salary is actually worth less in take-home than a £104,000 salary. A bizarre cliff edge. Pension contributions can nudge you back below £100,000 and save tens of thousands of pounds. Read about effective tax rates to see this in action.
Alternatively, if you're currently earning hourly and negotiating a salary bump, always convert to take-home before accepting an offer. A £2,000 gross increase sounds good — but on take-home, it's only ~£1,320 after tax and National Insurance.
FAQ: Hourly to Salary Conversion
Q: What if my hourly rate varies week to week?
A: Use an average. Add up your gross pay over the last 13 weeks, divide by 13 to get your average weekly pay, then multiply by 52. This gives you an annualized figure even if you're on zero-hours, gig, or variable-hours work.
Q: Does part-time work have a different tax rate?
A: No. Tax is based on total annual income, not whether you work full-time or part-time. A part-time worker earning £15,000/year pays the same tax as anyone earning £15,000/year. However, you might miss out on employer benefits (pension, health insurance) which are often pro-rated or not available on part-time contracts. Check your employment contract.
Q: What counts as "hours per year"? Do I include lunch breaks?
A: No. Hours per year = time you're actually working. If your contract says 40 hours/week and lunch is unpaid (as is typical in the UK and US), that's 40 hours. If lunch is paid, it counts. Check your employment contract for clarity.
Q: My hourly rate includes tips or commission. How do I calculate annual salary?
A: Use your average hourly earnings over the last 13 weeks. Tips and commission are irregular, so annualizing a single week is unreliable. Average over at least three months to account for seasonal variation.
Q: If I move from hourly to salaried, will my pension change?
A: Usually yes. Hourly workers often don't have a workplace pension; salaried roles typically include one. Check your employment contract — you'll see the employer contribution rate (often 3–5%). That's additional money going to your retirement, not appearing on your payslip. Read about salary sacrifice to understand how pensions affect your net pay.
Q: Should I negotiate salary on gross or net?
A: Negotiate on gross — that's the standard figure employers work with. But always evaluate offers using net pay. A £45,000 gross is meaningless if you don't know your take-home. Use our salary calculator to convert gross to net, then compare offers fairly.
Q: How do I know if my conversion is correct?
A: Divide the annual salary by 2,080 (for 40 hours/week full-time work). That's your gross hourly rate. If you're offered "£38,000 salary", verify that's about £18.27/hour gross (£38,000 ÷ 2,080 = £18.27 ✓). If someone claims "£25/hour" is a £52,000 salary, check: £25 × 2,080 = £52,000 ✓. (Though that's high — might include overtime or claimed bonuses.)
Q: Do I recalculate my conversion every year?
A: The conversion formula itself is stable. But your actual take-home changes if tax bands, allowances, or National Insurance rates change (which they do every April in the UK). Check the latest allowances on Gov.uk each tax year and use our salary calculator to see your updated take-home figure.
Use the Calculator to Get Your Real Take-Home
The hourly-to-salary formula is simple: hourly rate × 2,080 = annual salary. But your take-home pay is complex — income tax, National Insurance, pension contributions, student loans, and benefits in kind all play a role.
Head to our salary calculator and enter your gross salary to see an instant breakdown by tax, National Insurance, and take-home. If you're comparing job offers, run both through the calculator. The highest gross salary doesn't always mean the highest take-home pay once you factor in location, tax band, pension contributions, and actual hours worked.
For US readers, use our US salary calculator — it factors in federal tax, state tax (choose your state), Social Security, and Medicare. For even deeper analysis, check average salary by region and industry to benchmark your offer against the market.