Your payslip tells you exactly where your money goes each month. Yet most people barely glance at theirs — and some don’t check at all. Understanding every line on your payslip helps you spot errors, ensure you’re paying the right tax, and plan your finances properly.
The Three Sections of a UK Payslip
Every UK payslip is divided into three core sections: earnings, deductions, and net pay. Some payslips also show year-to-date totals and employer contributions.
1. Gross Pay (Earnings)
Gross pay is your total pay before anything is taken off. It includes:
- Basic salary — Your agreed annual salary divided by the number of pay periods (usually 12 for monthly, 52 for weekly).
- Overtime — Extra pay for hours worked beyond your contracted hours. This may be at a different rate (time-and-a-half, double time).
- Bonus — Performance-related or annual bonuses. These may be taxed differently depending on how they’re structured.
- Commission — Common in sales roles. Usually taxed as ordinary income.
- Allowances — Tax-free or taxable allowances such as shift differentials, location allowances, or uniform allowances.
2. Deductions
Deductions are amounts taken from your gross pay. The main deductions are:
| Deduction | What It Is | Mandatory? |
|---|---|---|
| Income Tax | PAYE tax based on your tax code | Yes |
| National Insurance | Class 1 NI contributions | Yes |
| Pension contribution | Workplace or personal pension | Depends on scheme |
| Student loan repayment | If you have a Plan 1, 2, 4, or 5 loan | Only if applicable |
| Workplace benefits | Health insurance, company car, etc. | Only if applicable |
3. Net Pay (Take-Home Pay)
Net pay is what’s left after all deductions. This is the amount that actually lands in your bank account. It’s sometimes labelled as “Net Pay,” “Take-Home Pay,” or “Amount Payable.”
Tax Codes Explained
Your tax code tells your employer how much income tax to deduct. The most common code is 1257L, but codes vary.
How 1257L Works
The number represents your tax-free Personal Allowance divided by 10:
- 1257L = £12,570 Personal Allowance (the standard amount for 2026/27)
- L = Standard code for most employees
Other common codes:
| Code | Meaning |
|---|---|
| BR | Basic rate — all income taxed at 20% (often used for second jobs) |
| D0 | Higher rate — all income taxed at 40% |
| D1 | Additional rate — all income taxed at 45% |
| NT | No tax — no tax to be deducted |
| K prefix | You owe tax from a previous year (negative allowance) |
| W1/M1 | Emergency tax code (week 1/month 1 basis) |
Where to Find Your Tax Code
- On your payslip (usually near the top)
- In your Personal Tax Account on gov.uk
- On your P45 when you leave a job
What to Check
Make sure your tax code matches your circumstances. If it’s wrong, you could be overpaying or underpaying tax. Common issues:
- You’ve started a new job and are on an emergency code (W1/M1)
- You have a second job and both are using the standard allowance
- You’ve received benefits in kind (like a company car) that change your code
National Insurance Bands
National Insurance is calculated separately from income tax using annual thresholds.
Employee NI Rates (2026/27)
| Earnings Band | Annual Amount | NI Rate |
|---|---|---|
| Below Primary Threshold | Up to £12,570 | 0% |
| Between thresholds | £12,571 - £50,270 | 8% |
| Above Upper Earnings Limit | Above £50,270 | 2% |
The NI thresholds are aligned with income tax bands for simplicity — both start at £12,570.
Pension Contributions
Most UK workers are auto-enrolled into a workplace pension under the government’s automatic enrolment scheme.
How Pensions Appear on Your Payslip
| Pension Type | Where It Appears |
|---|---|
| Workplace pension (auto-enrolment) | Deducted from gross pay before tax |
| Salary sacrifice pension | Shown as reduced gross pay |
| Personal pension (SIPP) | Not usually on payslip — claimed via Self Assessment |
Tax Relief on Pensions
Pension contributions get tax relief automatically through your employer’s scheme. If you’re a basic rate taxpayer contributing 5% of a £35,000 salary:
- You pay: £1,750 per year (or £145.83 per month)
- Tax relief adds: £437.50
- Total going into your pension: £2,187.50
Student Loan Repayments
If you have a student loan, repayments appear as a separate deduction on your payslip.
Repayment Plans
| Plan | Threshold (2026/27) | Repayment Rate | When It’s Written Off |
|---|---|---|---|
| Plan 1 | £22,015/year | 9% of income above threshold | 25 years (after first repayment) |
| Plan 2 | £27,295/year | 9% of income above threshold | 30 years (after first repayment) |
| Plan 4 | £27,660/year | 9% of income above threshold | 30 years (after first repayment) |
| Plan 5 | £25,000/year | 9% of income above threshold | 40 years (after first repayment) |
Repayments are calculated on income above the threshold, not total income. If you’re on Plan 2 and earn £30,000, you repay 9% of (£30,000 - £27,295) = £243.45 per year.
Example Payslip Breakdown: £35,000 Salary
Here’s what a typical monthly payslip looks like for someone earning £35,000 per year, on tax code 1257L, with a 5% workplace pension and a Plan 2 student loan.
Monthly Gross Pay
| Item | Calculation | Monthly Amount |
|---|---|---|
| Basic salary | £35,000 / 12 | £2,916.67 |
Monthly Deductions
| Deduction | Calculation | Monthly Amount |
|---|---|---|
| Income Tax (20%) | (£35,000 - £12,570) x 20% / 12 | £373.83 |
| National Insurance (8%) | (£35,000 - £12,570) x 8% / 12 | £149.50 |
| Pension (5% of gross) | £35,000 x 5% / 12 | £145.83 |
| Student Loan Plan 2 (9%) | (£35,000 - £27,295) x 9% / 12 | £57.54 |
| Total Deductions | £726.70 |
Net Pay
| Item | Monthly Amount |
|---|---|
| Gross Pay | £2,916.67 |
| Total Deductions | -£726.70 |
| Net Pay (Take-Home) | £2,189.97 |
Effective deduction rate: 24.9% of gross pay.
What to Check on Every Payslip
Don’t just file your payslip away. Review it for these common issues:
1. Correct Tax Code
If you’ve changed jobs, started a second job, or have benefits in kind, your tax code may not be right. An incorrect code means you’re paying too much or too little tax.
2. Pension Contribution Rate
Verify the percentage being contributed matches what you agreed. Auto-enrolment contributions can change if your earnings or age change.
3. Student Loan Plan
Check you’re on the correct repayment plan. If you’ve paid off your loan, make sure repayments have stopped — they don’t always stop automatically.
4. Employer Pension Contribution
If your employer offers matching contributions above the auto-enrolment minimum, make sure they’re paying what they promised.
5. Year-to-Date Totals
Compare your year-to-date earnings with your actual income to date. This helps you catch any missing or incorrect payments before the tax year ends.
Common Payslip Errors
Wrong Tax Code
If you’re on an emergency tax code (W1/M1 or BR) for more than a couple of months, you’re likely overpaying tax. Contact HMRC to get it corrected.
Missing Pension Contributions
Some employers only start pension contributions after a qualifying period. Check when yours should begin.
Incorrect NI Thresholds
Your employer must use the correct NI thresholds. If they’re calculating NI on earnings below £12,570, something is wrong.
Emergency Tax
When you start a new job without a P45, you may be placed on an emergency tax code. This usually sorts itself out within one or two payslips once HMRC issues a new code.
How to Get Your Payslip
- Electronic payslips — Most employers now provide digital payslips through a portal or email.
- Paper payslips — Some employers still issue paper payslips.
- HMRC records — You can check your tax and NI records through your Personal Tax Account on gov.uk.
Key Takeaways
- Your payslip has three main sections: gross pay, deductions, and net pay.
- The tax code 1257L means you get £12,570 tax-free — check yours is correct.
- NI is calculated on earnings between £12,570 and £50,270 at 8%, then 2% above that.
- Pension contributions reduce your tax bill and boost your retirement savings.
- Student loan repayments are 9% of income above your plan’s threshold.
- Always check your payslip for errors — wrong tax codes are the most common mistake.