A 5% raise with 4% inflation is not the same as a 5% raise with 2% inflation. See exactly how much purchasing power you gain or lose after tax, and what gross raise you need just to break even in real terms.
5% raise, 3% inflation
Ahead by ~€1,200/yr
€75K, Ireland, real terms
4% raise, 5% inflation
Behind by ~€800/yr
€75K, Ireland, real terms
6% raise, 4% inflation
Ahead by ~£900/yr
£60K, UK, real terms
Your raise is not keeping pace with 3% inflation
Your 4% gross raise only grows your net take-home by 2.7% in nominal terms. With 3% CPI, you lose €140 per year in real purchasing power.
Impact breakdown
Nominal net gain
+€1,434
per year, after tax
Real gain (today's €)
-€140
purchasing power
Monthly net change
-€12
real terms
Net income grows
2.7%
beat CPI below this
Nominal vs real net take-home
Your 4% gross raise grows your net take-home by 2.7% nominally. This falls below 3% inflation. You are losing €140 of real purchasing power per year.
Sources: Revenue.ie (Budget 2026) · HMRC (2026/27) · CSO Ireland · ONS UK
The marginal tax wedge
Salary increases are taxed at your marginal rate, not your average rate. In Ireland, income above €44,000 is taxed at 40% plus USC and PRSI, meaning you keep roughly 47–52 cents of each additional euro gross. To gain €1 in real net purchasing power, you need approximately €1.90–€2.10 of gross raise at that level.
The break-even formula
Your net take-home must grow by at least the inflation rate in nominal terms for you to stand still in real terms. The required gross raise is: inflation rate divided by (1 minus your marginal effective tax rate). At a 50% combined marginal rate and 4% inflation, you need roughly 8% gross to break even — twice the inflation rate.
Ireland 2026 marginal rates
UK 2026/27 marginal rates
Your nominal salary is the number on your payslip. Your real salary is what that number can actually buy, adjusted for inflation. If your gross salary rises by 4% but inflation is 5%, you are 1% worse off in real terms, because the same euro or pound buys less than it did last year. The distinction matters most when evaluating whether a pay rise actually improves your standard of living.
The accurate method is to compare real net take-home, not gross figures. First, calculate your current net salary after tax. Then calculate your new net salary after the raise. Divide the new net by the inflation factor (1 + inflation rate) to express it in today's purchasing power. If the result is higher than your current net, you are ahead of inflation. If it is lower, your standard of living has declined in real terms. This calculator does that calculation automatically.
At €75,000, to maintain the same purchasing power with 4% inflation, you need your net take-home to grow by 4% in nominal terms. Because of the progressive tax system, you need a gross raise larger than 4% to achieve this — roughly 5.5–7% gross depending on your starting salary and which tax bands are crossed. The calculator shows your exact break-even gross raise for any inflation rate.
Because income tax is progressive. The additional gross income from your raise is taxed at your marginal rate, not your average rate. If you are in the 40% band in Ireland, every additional euro of gross raise yields only about 47–52 cents net after income tax, USC, and PRSI. To get €1 of real net gain in purchasing power, you need roughly €1.90–€2.10 of gross raise at that level. The higher your marginal tax rate, the wider the gap between your gross raise and your real net improvement.
It depends on your starting salary and the prevailing inflation rate. In Ireland, if inflation is running at 3–4%, a 5% gross raise leaves most employees modestly ahead in real terms, with roughly 1–2% real purchasing power improvement. In the UK, at similar inflation, a 5% raise is also generally positive in real terms for most salary levels. However, at higher salaries in the 40% marginal tax band, a 5% gross raise may only deliver 2.5–3% net improvement, which narrows the real gain further.
The break-even inflation rate is the inflation level at which your gross raise exactly preserves your current purchasing power — you are neither ahead nor behind in real terms. For example, if your net take-home rises by 3.5% after a gross raise, then 3.5% inflation is your break-even point. Above 3.5%, you are losing purchasing power; below it, you are gaining. This is displayed directly in the calculator results.
Pension contributions reduce your taxable income, so they affect both your current and post-raise net take-home. This calculator assumes standard PAYE deductions with no pension contributions to give a clean baseline comparison. If you also increase your pension contribution with your raise, your actual net cash gain will be lower than shown, but your total compensation (cash plus pension) will be higher. For most employees the calculator gives an accurate estimate of the cash take-home change.