Understanding your payslip

Why your payslip matters

Your payslip is the starting point for your budget. It shows what you earn, what's deducted and what you actually take home. Checking it each month also helps you spot mistakes, which happen more often than you might think.

A worked example

Here's a simplified payslip for someone earning £30,000 a year, paid monthly, living in England, paying the minimum into a workplace pension and with no student loan.

Gross pay

This is what you earn before anything is taken off. It includes your basic salary plus any overtime, bonus or commission paid that month.

Income Tax and your tax code

In 2026/27, most people can earn £12,570 a year before paying Income Tax. This is called the Personal Allowance. In England, Wales and Northern Ireland, you then pay:

• 20% on income from £12,571 to £50,270 (basic rate)
• 40% on income from £50,271 to £125,140 (higher rate)
• 45% on income over £125,140 (additional rate).

Income Tax works differently in Scotland, which has its own bands and rates.

Your tax code tells your employer how much tax-free income you get. The most common code is 1257L. The number is your £12,570 allowance with the last digit removed, and the L means you get the standard allowance.

If your code ends in W1, M1 or X, it's an emergency code. These are common when you start a new job and are usually temporary. HMRC normally corrects them once it has your details, which can take up to 35 days. If it still looks wrong after that, you can check and update it in your HMRC online account or the HMRC app.

National Insurance

National Insurance builds your entitlement to the State Pension and some benefits. In 2026/27, employees pay 8% on earnings between £1,048 and £4,189 a month, and 2% on anything above that.

Pension contributions

If you've been enrolled in a workplace pension, your contribution appears here. Depending on your scheme, it's either taken before tax, or taken after tax with tax relief added to your pension by your provider. Your employer's contribution isn't taken from your pay, so it may not appear on your payslip at all.

Student loan repayments

If you have a student loan, repayments are taken automatically once you earn above your plan's threshold. For undergraduate loans, you repay 9% of what you earn above the threshold. For postgraduate loans, it's 6%. Thresholds vary by plan, so check yours on GOV.UK.

Take-home pay

This is what reaches your bank account after all deductions. It's the figure to use when you build your budget.

What to check each month

• Your tax code looks right and isn't an emergency code months after starting a job.
• Your hours, overtime and any bonus match what you expected.
• Your pension contribution matches what you agreed.
• Your year-to-date totals add up, so nothing has been missed.

Keep your payslips, or download them regularly. You may need them to apply for a mortgage or rent a home.

Common questions

Why is my first payslip lower than expected?

You may be on an emergency tax code, or your first payment may only cover part of a month. Emergency codes are usually corrected once HMRC has your details.

What's the difference between gross and net pay?

Gross pay is what you earn before deductions. Net pay, or take-home pay, is what you receive after Income Tax, National Insurance, pension contributions and any student loan repayments.

What should I do if my tax code is wrong?

Check it in your HMRC online account or the HMRC app, where you can tell HMRC about any changes. If you've paid too much tax, it's usually refunded through your pay or after the end of the tax year.

Sources

We checked this guide against these sources on 8 October 2026. Rules and allowances can change, so always check the latest position on GOV.UK.

• GOV.UK: Income Tax rates and Personal Allowances
• GOV.UK: What your tax code means
• GOV.UK: Emergency tax codes
• GOV.UK: National Insurance, how much you pay
• GOV.UK: Pension tax relief

This guide is general information, not personal financial advice. Read our full disclaimer.