Your payslip is a legal document that shows exactly how your employer has calculated your pay. Every line has a specific meaning and follows HMRC rules precisely. Understanding it means you can verify you are being paid correctly, spot errors early, and make informed decisions about pension contributions, salary sacrifice, or tax code changes. This guide walks through each section of a typical UK payslip for the 26-27 tax year with current rates.[1]
What does the “Gross Pay” line mean?
Gross pay is your total earnings before any deductions. This is the headline figure in your employment contract divided by 12 (for monthly pay) or 52 (for weekly). It may include overtime, bonuses, commission, or shift allowances on top of your base salary. If you are paid monthly and your annual salary is £30,000, your gross pay should be £2,500 each month. Any variation from this figure should be explained by additional payments or adjustments shown on the same payslip.
Some payslips show “Taxable Gross” separately from total gross — this is the amount after salary sacrifice deductions (pension, childcare vouchers, cycle scheme) have been removed. The salary sacrifice amount is deducted before tax and NI are calculated, which is why it provides a tax saving.
How is income tax calculated each month?
Your income tax is calculated cumulatively throughout the year. Your employer divides your annual Personal Allowance (£12,579) by 12 to get your monthly tax-free amount of £1,048. Earnings above this are taxed at 20% (basic rate) up to a monthly limit of approximately £4,189, then at 40% (higher rate) above that. Your tax code (1257L for the standard allowance) tells your employer how much tax-free income to give you.[2]
The cumulative system means that if you underpaid tax in earlier months (perhaps because you started mid-year and had unused allowance), you receive the benefit in later months as a reduced tax deduction. Equally, if you overpaid in earlier months, the system self-corrects — you do not need to claim a refund separately.
If your payslip shows a tax code with “W1” or “M1” after it, this means non-cumulative (emergency) calculation — see our emergency tax code guide for what to do.
How is National Insurance calculated on my payslip?
Unlike income tax, National Insurance is calculated per pay period (not cumulatively). Each month stands alone. For a monthly-paid employee with NI category A, the calculation is:
- 0% on the first £87 (below the Primary Threshold)
- 8% on earnings between £87 and £349
- 2% on earnings above £349 (above the Upper Earnings Limit)
Your NI category letter (usually “A” for standard employees) determines which rates apply. You can find this on your payslip — it affects the rates but not the thresholds. Category A is by far the most common and applies to employees under State Pension age who are not in special categories like married women with reduced rate elections (B) or those over pension age (C).
What are the common deductions on a payslip?
Beyond tax and NI, typical deductions include:
- Pension contribution — shown as a percentage of qualifying earnings or gross pay. Auto-enrolment minimum is 5% employee + 3% employer. Salary sacrifice pensions will show as a reduction in gross pay instead of a deduction line.
- Student loan — deducted at 9% of earnings above the relevant plan threshold. Your payslip should show the plan type (1, 2, 4, or 5) and the monthly deduction.
- Salary sacrifice (bikes, EVs, childcare) — reduces your gross pay before tax and NI are applied. Should appear before the tax calculation line.
- Attachment of Earnings Orders — court-ordered deductions for debts, child maintenance, or council tax arrears.
What do the “Year to Date” figures tell me?
Most payslips show cumulative totals for the tax year (starting 6 April). These are essential for verifying your tax is correct because the PAYE system works cumulatively. Key year-to-date figures to check:
- Taxable pay YTD — should be your gross pay minus any salary sacrifice, multiplied by the number of months worked so far.
- Tax paid YTD — should broadly match what you would expect from the calculator (though it may differ slightly in early/late months due to the cumulative system).
- NI paid YTD — the sum of each month's NI (calculated per period, not cumulatively).
- Pension contributions YTD — useful for checking you are not exceeding the £60,000 annual allowance.
How do I check if my payslip is correct?
Follow these steps to verify your payslip matches what you should be receiving:
- Check your tax code matches what HMRC has issued (visible in your Personal Tax Account online). The standard code for 26-27 is 1257L.
- Verify your gross pay matches your contract (annual salary ÷ 12 for monthly, plus any additional payments shown).
- Use the income tax calculator to compare expected deductions against actual. Enter your gross annual salary and compare the monthly breakdown.
- Check NI category letter is correct (A for most employees).
If you find a discrepancy, first check with your payroll department — it may be a timing issue or a legitimate adjustment. If your tax code is wrong, you need to contact HMRC directly (your employer cannot change it). See our tax codes guide for how to interpret and fix tax code issues.
What is the difference between net pay and take-home pay?
“Net pay” on your payslip is your gross pay minus all statutory and voluntary deductions — this is the amount that hits your bank account. It includes deductions for income tax, NI, pension contributions, student loans, and any other items. Some people confuse “net pay” with “taxable pay” — they are different. Taxable pay is your gross minus only tax-free deductions (like salary sacrifice), and it is the figure used to calculate your income tax.
For a complete analysis of your net pay position, including comparison against different salary levels, use our calculator at £30,000 to see a full breakdown of all deductions from that salary.
Sources
- GOV.UK — Understanding your pay: your payslip. What your employer must show on your payslip by law. Accessed July 2026.
- HMRC — Income Tax rates and Personal Allowances. Personal Allowance £12,579, basic rate 20%, higher rate 40%. Accessed July 2026.
- HMRC — National Insurance rates and categories. Category A employee rate 8% between Primary Threshold and Upper Earnings Limit. Accessed July 2026.