Pay, Payslips & Employee Benefits UKHow to Read Your Payslip UK — Understanding Every Deduction
Confused by your payslip? Learn what every line means — from gross pay to National Insurance, pension, student loans, and take-home pay explained simply.
Your payslip contains vital information about your earnings and deductions, but it can look like a foreign language. Here’s a complete breakdown of every section so you know exactly where your money goes.
Anatomy of a Payslip
Sample Payslip Layout
| Section | What It Shows |
|---|
| Top Section | Your details, employer, pay period, payment date |
| Earnings | Gross pay, overtime, bonuses, commission |
| Deductions | Tax, NI, pension, student loan |
| Year to Date | Cumulative figures for the tax year |
| Net Pay | Your take-home pay |
Understanding the Header
| Field | Meaning |
|---|
| Employee name | Your legal name for tax purposes |
| Employee number | Your unique reference with this employer |
| NI number | Your National Insurance number (format: AB123456C) |
| Tax code | Determines how much tax-free pay you get (e.g., 1257L) |
| Pay period | Week number or month (e.g., “Month 6” = September) |
| Payment date | When the money reaches your account |
Earnings Section Explained
Basic Earnings
| Term | Meaning |
|---|
| Basic pay | Your contracted salary for this period |
| Gross pay | Total earnings before any deductions |
| Hourly rate | Your pay per hour (if applicable) |
| Hours worked | Number of hours this period |
Additional Earnings
| Term | Meaning |
|---|
| Overtime | Pay for hours beyond your contract (often at 1.5x) |
| Bonus | One-off or performance-related payments |
| Commission | Sales-related payments |
| Shift allowance | Extra pay for unsociable hours |
| Holiday pay | Payment for holiday taken this period |
| Sick pay | SSP or company sick pay |
| Maternity/Paternity pay | SMP/SPP or enhanced pay |
| Back pay | Correction for previous underpayment |
| Expenses | Reimbursed costs (usually not taxed) |
Benefits in Kind
| Term | Meaning |
|---|
| Company car | Taxable value of car benefit |
| Private medical | Taxable value of health insurance |
| Gym membership | Taxable if paid by employer |
Deductions Section Explained
Income Tax
| Field | Meaning |
|---|
| Tax | Income Tax deducted |
| Tax code | Determines your tax-free amount |
| Tax period | Week or month number in tax year |
How Tax Is Calculated (2025/26)
| Income Band | Tax Rate |
|---|
| £0 - £12,570 | 0% (Personal Allowance) |
| £12,571 - £50,270 | 20% (Basic rate) |
| £50,271 - £125,140 | 40% (Higher rate) |
| Over £125,140 | 45% (Additional rate) |
National Insurance
| Field | Meaning |
|---|
| NI | National Insurance Contributions |
| NI Category | The letter code (usually A) |
| NI Number | Your unique reference (e.g., AB123456C) |
NI Category Letters
| Letter | Who It Applies To |
|---|
| A | Standard — most employees |
| B | Married women/widows on reduced rate (historical) |
| C | Over State Pension age |
| H | Apprentice under 25 |
| J | Deferment (have other job paying NI) |
| M | Under 21 |
| Z | Under 21, above Upper Earnings Limit |
NI Rates (2025/26)
| Earnings | Employee Rate | Employer Rate |
|---|
| Below £12,570/year | 0% | 0% |
| £12,570 - £50,270 | 8% | 13.8% |
| Above £50,270 | 2% | 13.8% |
Pension Contributions
| Field | Meaning |
|---|
| Pension | Your contribution to workplace pension |
| Employee contribution | Amount you pay (usually 5%) |
| Employer contribution | Amount employer pays (minimum 3%) |
| AVC | Additional Voluntary Contributions |
Pension Contribution Types
| Type | How It Works |
|---|
| Relief at source | Pension provider claims tax relief |
| Salary sacrifice | Contribution taken before tax (more efficient) |
| Net pay arrangement | Contribution from gross pay (no further claims needed) |
Student Loan
| Field | Meaning |
|---|
| Student loan | Repayment deducted at source |
| SL1, SL2, PGL | Loan type being repaid |
Student Loan Thresholds (2025/26)
| Plan | Threshold | Repayment Rate |
|---|
| Plan 1 (pre-2012) | £24,990/year | 9% above threshold |
| Plan 2 (post-2012) | £27,295/year | 9% above threshold |
| Plan 4 (Scotland) | £31,395/year | 9% above threshold |
| Plan 5 (from 2023) | £25,000/year | 9% above threshold |
| Postgraduate | £21,000/year | 6% above threshold |
Other Deductions
| Field | Meaning |
|---|
| Childcare vouchers | Pre-tax childcare scheme (legacy) |
| Cycle to work | Salary sacrifice for bicycle |
| Give As You Earn | Charitable donations from salary |
| SAYE/Sharesave | Share scheme contributions |
| Union dues | Trade union membership |
| Court order | Earnings attachment for debts |
| CSA/CMS | Child maintenance deduction |
Understanding Your Tax Code
Standard Code: 1257L
| Component | Meaning |
|---|
| 1257 | Your Personal Allowance is £12,570 (add a zero) |
| L | Standard tax-free amount applies |
Common Tax Codes
| Code | Meaning |
|---|
| 1257L | Standard — £12,570 tax-free |
| BR | All income taxed at Basic Rate (no tax-free allowance) |
| D0 | All income taxed at 40% (second job) |
| D1 | All income taxed at 45% |
| NT | No tax (diplomatic staff, etc.) |
| 0T | No Personal Allowance |
| K codes | You owe more tax than your allowance covers |
| M | Receiving Marriage Allowance transfer |
| N | Transferring Marriage Allowance |
Scottish Tax Codes
| Code | Meaning |
|---|
| S1257L | Scottish taxpayer with standard allowance |
| S codes | Subject to Scottish Income Tax rates |
Emergency Tax Codes
| Indicator | Meaning |
|---|
| W1 | Weekly emergency tax (non-cumulative) |
| M1 | Monthly emergency tax (non-cumulative) |
| X | Used alongside other codes for emergency |
If you see W1 or M1, your tax is calculated only on this period’s earnings. Contact HMRC or give your employer your P45 to switch to cumulative.
Year-to-Date Section
| Field | Meaning |
|---|
| Gross pay YTD | Total earnings this tax year |
| Tax paid YTD | Total tax deducted this tax year |
| NI paid YTD | Total NI deducted this tax year |
| Pension YTD | Total pension contributions this tax year |
| Taxable pay YTD | Gross pay minus pension (before tax) |
This section helps you verify your tax is correct by tracking cumulative amounts since April 6th.
Common Payslip Queries
“Why has my tax suddenly increased?”
| Possible Reason | Explanation |
|---|
| Bonus payment | Higher earnings = higher tax bracket |
| Tax code change | Check if your code has changed |
| Caught up underpayment | HMRC adjusting for earlier months |
| Lost Personal Allowance | Income over £100,000 loses allowance |
| Benefit added | Company car or other benefit taxed |
“Why is my first payslip higher/lower than expected?”
| Reason | Explanation |
|---|
| Part month | Didn’t work full period |
| Emergency tax | Employer waiting for P45/tax code |
| Cumulative calculation | Catching up on unused allowance |
“My payslip shows a different pension contribution than expected”
| Check | Details |
|---|
| Contribution basis | Some pensions calculated on qualifying earnings, not full salary |
| Salary sacrifice | Shows as lower gross pay, not pension deduction |
| Tax relief method | Relief at source adds to contribution value |
Payslip Calculations: Worked Example
Example: £30,000 Salary (Monthly)
| Item | Monthly Amount | Calculation |
|---|
| Gross pay | £2,500.00 | £30,000 ÷ 12 |
| Tax-free portion | £1,047.50 | £12,570 ÷ 12 |
| Taxable pay | £1,452.50 | £2,500 - £1,047.50 |
| Income Tax (20%) | -£290.50 | £1,452.50 × 20% |
| NI threshold | £1,047.50 | £12,570 ÷ 12 |
| NI-able earnings | £1,452.50 | £2,500 - £1,047.50 |
| National Insurance (8%) | -£116.20 | £1,452.50 × 8% |
| Pension (5%) | -£125.00 | £2,500 × 5% |
| Net pay | £1,968.30 | £2,500 - £290.50 - £116.20 - £125.00 |
Annual Breakdown: £30,000 Salary
| Item | Annual Amount |
|---|
| Gross salary | £30,000 |
| Income Tax | £3,486 |
| National Insurance | £1,394 |
| Pension (5%) | £1,500 |
| Take-home pay | £23,620 |
Checking Your Payslip Is Correct
Monthly Checklist
| Check | What to Compare |
|---|
| Gross pay | Matches your contract/annual salary ÷ 12 |
| Tax code | Matches your HMRC Personal Tax Account |
| Tax deducted | Roughly correct for your income |
| NI deducted | Roughly 8% of pay above £1,047/month |
| Pension | Matches your scheme rate |
| Student loan | Only if you have one, correct plan |
Red Flags
| Issue | Action |
|---|
| Tax code wrong | Contact HMRC via Personal Tax Account |
| Payslip not provided | Employer legally must give you one |
| Deductions unexplained | Ask HR/payroll for breakdown |
| Hours wrong | Report to manager immediately |
| Paid incorrect amount | Raise with payroll urgently |
Your Rights
| Right | Details |
|---|
| Right to a payslip | All employees must receive one by law |
| Itemised deductions | All fixed deductions must be explained |
| Pay on time | Must be paid on agreed date |
| Query discrepancies | Employer must investigate concerns |
| Keep records | Keep payslips for tax/benefit purposes |