The UK Payslip Guide

Gross pay

This is your full earnings for the period, before anything is deducted. If your contract says £28,000 a year and you're paid monthly, your gross pay is £28,000 ÷ 12 = £2,333.33 before tax. Every other number on your payslip is calculated from this figure.

Your tax code

A tax code tells your employer how much of your income is tax-free. The most common code is 1257L, which means you can earn £12,570 a year before paying any Income Tax — this is called your Personal Allowance. The number is your allowance divided by 10; the letter describes your situation (L is the standard code for most people).

If your code looks different — BR (all income taxed at the basic rate, often used for a second job), 0T (no personal allowance applied), or one ending in W1/M1 (an emergency, non-cumulative code) — it's worth checking with HMRC that it's correct. The wrong tax code is one of the most common reasons people overpay tax without noticing.

Income Tax (PAYE)

PAYE stands for Pay As You Earn — it's simply how Income Tax gets collected directly from your wages by your employer, rather than you paying HMRC yourself at the end of the year. For 2025/26, income above your Personal Allowance is taxed at 20% (basic rate) up to £50,270, then 40% (higher rate) above that, up to £125,140.

National Insurance (NI)

National Insurance is a separate deduction from Income Tax. It funds your entitlement to the State Pension, and contributes to statutory sick pay, maternity pay, and other benefits. Most employees pay Class 1 NI, deducted automatically once you earn above a set threshold (around £242/week for 2025/26). Unlike a general tax, NI is tied directly to your future entitlements — gaps in your NI record can affect what you're eligible for later.

Pension contributions

If you see a pension deduction, you've likely been automatically enrolled into a workplace pension — UK law requires most employers to do this. A typical minimum contribution is 5% from you and 3% from your employer, calculated on a band of your earnings (not your full salary). This deduction reduces your take-home pay now, but it's money still yours, growing for retirement — you can usually opt out, but most people are better off staying in.

Student loan repayments

If you took out a UK student loan, repayments only start once your income crosses a repayment threshold, which depends on your loan plan (Plan 1, 2, 4, 5, or Postgraduate). Above the threshold, a fixed percentage of the income over that line is deducted — it isn't a fixed amount, so it moves with what you earn.

Net pay

This is what's left after every deduction above — the amount that actually reaches your bank account. It's the number that matters for budgeting, not your gross salary, since gross pay overstates what you actually have to live on.

Why the numbers sometimes look different month to month

Small changes are normal: a slightly different NI figure if your pay period includes overtime or bonuses, a pension contribution that shifts with your earnings, or a tax adjustment if HMRC corrects your code partway through the year. A large, unexplained jump is worth asking payroll about directly.

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