Most people receive a payslip every month but never fully understand what it says. Understanding your payslip means you can spot errors, understand your deductions, and make informed decisions about pensions, salary sacrifice, and tax planning.
The Anatomy of a UK Payslip
A typical UK payslip includes the following sections:
Employee and Employer Information
At the top you’ll find:
- Your name and employee number (or NI number)
- Your employer’s name and address
- The pay period (e.g., Month 3 — June 2026)
- Your payment date
Earnings Section
| Line | What it shows |
|---|---|
| Basic salary | Your base contractual pay for the period |
| Overtime | Any hours paid above your contracted hours |
| Bonus / commission | Variable pay added this period |
| Sick pay | Statutory (SSP) or contractual sick pay |
| Holiday pay | Payment for holidays taken or paid out |
| Salary sacrifice deduction | Reduction in gross for pension/EV/cycle sacrifice |
| Gross pay | All taxable earnings combined before deductions |
Some payslips show “Total gross pay” separately from “Total subject to tax” — the difference is usually salary sacrifice contributions, which reduce your taxable gross.
Tax and NI Deductions
Income Tax
Your income tax deduction is based on:
- Your tax code (see below)
- Your gross taxable earnings in the period
- Whether your code is on a cumulative or week/month basis
In a cumulative code (most codes), the year-to-date earnings and tax are tracked, so if you receive an irregular payment one month your tax adjusts across the year. In a W1/M1 (non-cumulative) code, each pay period is treated independently.
National Insurance
NI is deducted based on two thresholds:
- Primary Threshold (PT): £12,570/year (£1,047.50/month) — NI starts here
- Upper Earnings Limit (UEL): £50,270/year (£4,189/month) — rate changes here
| Earnings band | Employee NI rate (2026/27) |
|---|---|
| Below PT | 0% |
| PT to UEL | 8% |
| Above UEL | 2% |
NI is calculated on a per-pay-period basis (not cumulatively), which can create issues if you receive a large one-off payment in one month — you may pay more NI in that month than you would across the year.
Deductions Section
| Deduction | Description |
|---|---|
| Income tax | Based on code and cumulative earnings |
| Employee NI | 8% (PT–UEL) / 2% (above UEL) |
| Employee pension | Your pension contribution |
| Student loan | 9% of earnings above threshold (Plan-dependent) |
| Childcare vouchers | If using legacy scheme |
| Court order / DEA | Deduction for attachment of earnings / child maintenance |
| Other | Anything agreed with employer (e.g., season ticket loan repayment) |
Benefits in Kind Section
If you receive a benefit in kind (company car, private medical insurance, etc.), this may appear on your payslip for tax purposes. Your payroll system may increase your notional pay or adjust your tax code to collect the tax on these benefits.
Net Pay
The bottom line. This is what you receive in your bank account. It equals:
Gross pay minus income tax, minus employee NI, minus pension, minus student loan, minus other deductions
Decoding Your Tax Code
Your tax code is printed on your payslip and is one of the most important numbers to check. The standard code for 2026/27 is 1257L.
How the Number Works
The number (e.g., 1257) multiplied by 10 equals your annual tax-free allowance. So:
- 1257 × 10 = £12,570 personal allowance
If you have benefits in kind or untaxed income, your code will be lower (reducing the allowance being given via payroll). If you’re due additional allowances (e.g., marriage allowance transfer), it will be higher.
The Letters Explained
| Letter | Meaning |
|---|---|
| L | Standard personal allowance — the most common |
| M | Marriage Allowance transferred TO you (you receive an extra £1,260 allowance) |
| N | Marriage Allowance transferred FROM you to your partner |
| T | Other calculation adjustments — often complex circumstances |
| 0T | Personal allowance is zero (e.g., high income, two jobs, P45 not received) |
| BR | All income taxed at basic rate 20% — usually second job |
| D0 | All income taxed at higher rate 40% — usually second job |
| D1 | All income taxed at additional rate 45% |
| NT | No tax to be deducted |
| K | Negative allowance — you owe more tax than your allowance covers |
| S prefix (e.g., S1257L) | Scottish taxpayer — Scottish rates apply |
| C prefix (e.g., C1257L) | Welsh taxpayer |
Emergency Tax Codes
If your employer doesn’t have a P45 from your previous job, they may use an emergency code:
- 1257L W1 — week-1 basis (non-cumulative)
- 1257L M1 — month-1 basis (non-cumulative)
On these codes, each pay period is treated as if it’s the first of the year. This usually means over-paying tax until the code is corrected. Contact HMRC to fix this or provide your employer with a P45.
National Insurance Category Letters
Your payslip also shows your NI category letter. The most common:
| Letter | Who it applies to |
|---|---|
| A | Most employees under State Pension age — standard rates |
| C | Employees over State Pension age — no employee NI |
| B | Married women’s reduced rate (historically; rare now) |
| J | Deferring NI contributions (e.g., have another job that already pays max NI) |
| H | Apprentices under 25 — employer NI exemption bands apply |
| M | Employees under 21 — employer NI exemption bands apply |
| Z | Under 21 and deferring — rare |
If you’re on letter A, that’s correct for most employees. If you’re on B and didn’t elect this specifically, it may be wrong — contact payroll.
Checking Your Pension Deductions
Your pension section should show:
- Your employee contribution (usually a percentage of qualifying earnings)
- Whether it’s shown as a personal contribution or salary sacrifice
- The employer contribution may or may not appear (depends on the payroll system)
Key check: If your employer increased their matching for higher contributions and you opted in, verify the correct employer amount is shown in your pension portal (not necessarily on the payslip).
If pension is shown as a deduction (rather than a pre-tax sacrifice), you’re using the personal contribution / relief at source method. If the gross salary on your payslip is reduced by the pension amount, you’re on salary sacrifice.
Common Payslip Errors to Look For
| Error | What to look for | What to do |
|---|---|---|
| Wrong tax code | Code different from your HMRC notice | Contact payroll and HMRC |
| Emergency code (W1/M1) | After starting new job without P45 | Give employer P45 or contact HMRC |
| Wrong NI letter | Especially if recently reached State Pension age | Contact payroll |
| Missed pay rise | Gross salary hasn’t changed after agreed increase | Contact payroll in writing |
| Wrong pension percentage | Based on old election | Check pension portal and contact payroll |
| Student loan deducted despite paid off | Deductions continuing after zero balance | Get confirmation of loan clearance and notify payroll |
| Wrong flat-rate expense allowances | If you’re entitled to a uniform or equipment allowance | Check with HMRC |
Understanding Year-to-Date Totals
Most payslips include a year-to-date (YTD) cumulative column showing:
- Total gross earnings since 6 April
- Total income tax paid since 6 April
- Total NI paid since 6 April
These figures are important for:
- Checking you’re on track for your annual tax position
- Verifying your P60 at the end of the tax year matches the running totals
What to Do If You’ve Over-Paid Tax
If your tax code was wrong for part of the year, HMRC usually reconciles this automatically after the tax year ends and sends a P800 tax calculation. If you’re owed a refund, HMRC will pay it directly to your bank account or adjust your future tax code.
You can also check your tax position in real time at gov.uk/check-income-tax-current-year using your Personal Tax Account.
Related Guides
- UK Employment Rights: Redundancy, Leave, Contracts and Workplace Protections
- How to Read a P60 — end-of-year earnings summary
- Salary Sacrifice Complete Guide — how sacrifice affects your payslip
- Starting a Second Job — Tax Guide — BR codes and second income NI
- Got a Promotion? Financial Checklist — checking your payslip after a pay rise