Most people look at the bottom line on their payslip — the number that hits their bank account — and never look further. That's leaving a significant amount of information unread. Your payslip tells you exactly how much you earned, how much was taken, and why. Understanding each line is a basic financial skill that most people were never explicitly taught.
This guide covers every major line on a standard UK payslip. The principles apply broadly across employment; specific thresholds and rates are for the 2025/26 tax year.
The fundamental split: gross vs net
Gross pay is what you earned before anything is taken out. It is the number your employer agreed to pay you — your salary or hourly rate for the period, plus any overtime, bonuses, or additional payments.
Net pay is what you actually receive — gross pay minus all deductions. This is what lands in your bank account. The difference between gross and net is the total of all your deductions, and understanding what's in that gap is the whole point of reading your payslip.
Income tax: how it actually works
Income tax is the most significant deduction for most employees. It is calculated using a banded system — you don't pay the same rate on every pound you earn. You pay progressively higher rates as your income rises through each band.
| Band | Income (2025/26) | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic Rate | £12,571 – £50,270 | 20% |
| Higher Rate | £50,271 – £125,140 | 40% |
| Additional Rate | Over £125,140 | 45% |
The personal allowance (£12,570) is the amount you can earn without paying any income tax. Tax only applies to income above that threshold. If you earn £35,000, you don't pay 20% on the full £35,000 — you pay 20% on £35,000 minus £12,570 = £22,430. That's £4,486 in tax, not £7,000.
Your payslip will show a tax code, like 1257L. This code tells your employer how much of your personal allowance to apply to this job. 1257L is the standard code — the number (1257) × 10 gives your tax-free allowance (£12,570). Different codes indicate adjustments for benefits in kind, marriage allowance, or previous underpayments.
National Insurance: not the same as income tax
National Insurance (NI) contributions are separate from income tax. They fund state benefits including the State Pension, NHS, and certain welfare payments. Unlike income tax, NI only applies to earnings above a primary threshold and doesn't have a personal allowance equivalent in the same way.
Employee NI rates for 2025/26:
- On earnings between the Primary Threshold (£12,570) and Upper Earnings Limit (£50,270): 8%
- On earnings above the Upper Earnings Limit: 2%
Your employer also pays employer's NI — currently 15% on earnings above the Secondary Threshold. This does not appear on your payslip because it's not deducted from your pay; it's an additional cost to your employer on top of your salary.
Pension contributions
If you are auto-enrolled in a workplace pension scheme (which is mandatory for eligible workers), your pension contribution will appear as a deduction. The minimum contribution is 8% of qualifying earnings — split between employee and employer.
- Minimum employee contribution: 5% (of which 1% comes back as tax relief)
- Minimum employer contribution: 3%
Most employer schemes contribute more than the minimum. Your payslip shows your contribution (the amount deducted from your pay). Your employer's contribution is added to your pension pot separately and won't appear as a line on your payslip.
Student loan repayments
If you have a student loan, repayments are also collected through PAYE. The rate and threshold depend on which plan you're on:
| Plan | Repayment threshold (2025/26) | Rate above threshold |
|---|---|---|
| Plan 1 | £24,990/year | 9% |
| Plan 2 | £27,295/year | 9% |
| Plan 5 | £25,000/year | 9% |
| Postgraduate Loan | £21,000/year | 6% |
Repayments only apply to earnings above the threshold for that pay period. If you are on Plan 2 and earn £30,000 per year, you repay 9% of (£30,000 − £27,295) = 9% of £2,705 = roughly £243 per year, deducted monthly across your paycheques.
Other deductions you might see
- Benefits in kind: Some non-cash benefits (company car, private medical insurance) have a taxable value. The tax on these can be collected via your payslip rather than through a separate tax bill.
- Cycle to Work scheme / tech scheme: Salary sacrifice arrangements for bikes or tech equipment appear as deductions.
- Season ticket loan: If your employer provides an advance for a travel season ticket, repayments appear monthly.
- Court-ordered deductions: Attachment of earnings orders appear as a separate deduction line.
Year-to-date figures
Your payslip will also show cumulative figures for the tax year to date — total gross pay, total tax deducted, total NI paid. These are important for tracking your position against annual thresholds and for tax returns if you have one.
The tax year in the UK runs from 6 April to 5 April the following year. By the end of the tax year, your year-to-date figures should reconcile with any HMRC summary you receive.
What to check on every payslip
- Is your gross pay correct for the period? (Check for missed overtime, bonuses, or pay rises.)
- Is your tax code correct? A wrong code means you might be over- or under-paying tax.
- Are pension contributions deducting at the right percentage?
- If you have a student loan, is the correct plan being applied?
- Do year-to-date figures match your expectations?
Real Syllabus · Finance & Career
More Finance articles →