Understanding your payslip: every line explained

Published 13 September 2026 · 5 min read · Reviewed against official sources

A payslip is a short document that most people read once a month and understand about half of. That matters more than it sounds, because the two lines that go wrong most often — your tax code and your National Insurance — are the ones nobody checks. This is a line-by-line walk through a standard UK payslip, with the maths behind each figure and the things worth verifying.

Gross pay

Everything you earned in the period before any deduction: basic salary, overtime, bonus, commission, and taxable benefits if your employer processes them through payroll. This is the number all the others are calculated from. If it is wrong — an unpaid overtime shift, a missed pay rise — every deduction below it is wrong too, so it is the first thing to check against what you expected.

Tax code

A short code, typically a number followed by a letter, that tells your employer how much tax-free income to give you before deducting income tax. The most common is 1257L: the 1257 means £12,570 of tax-free Personal Allowance for the year, and the L means you are entitled to the standard allowance.

Other codes you might see:

BR — all income taxed at the basic rate with no allowance. Usually applied to a second job, where the allowance is already used against the first. If it appears on your only job, you are being overtaxed.
D0 or D1 — all income at higher or additional rate. Again, normally for a second income.
K codes (e.g. K475) — your untaxed income or benefits exceed your allowance, so extra tax is collected. Common with company cars or large underpayments from a previous year.
A number lower than 1257 — your allowance has been reduced, usually to collect tax on a benefit in kind or to recover underpaid tax.
M or N suffix — you are receiving or giving Marriage Allowance.
W1, M1 or X — an emergency or non-cumulative code. Tax is worked out on this pay period alone, ignoring the rest of the year. Often applied when you start a new job without a P45. It usually over-taxes and should be corrected by HMRC within a couple of months.

Your code is the single most common source of incorrect deductions. If it changed and you do not know why, HMRC's online personal tax account shows the calculation behind it, and you can challenge it there.

Income tax (PAYE)

Deducted on taxable pay above your allowance. For the 2026/27 tax year in England, Wales and Northern Ireland the bands are 20% on the first £37,700 of taxable income, 40% from there to £125,140, and 45% above that. Scotland sets its own bands.

PAYE is cumulative: each month your employer works out the tax due on your total pay for the year to date, subtracts what has already been deducted, and takes the difference. This is why an uneven month tends to correct itself — a bonus in April is over-taxed that month and the following months claw it back. A W1 or M1 code switches this off, which is why those codes over-tax.

National Insurance

For employees, 8% of earnings between £12,570 and £50,270 a year, then 2% on everything above. On a payslip this is worked out per pay period rather than cumulatively, so a bonus month is charged NI on that month's figure in isolation and there is no later correction. This is the mechanism behind the common experience of "my bonus was taxed at a ridiculous rate" — it was, and the NI part of that does not come back.

The letter next to NI (usually A) is your category. If you are over State Pension age it should be C, meaning no employee NI at all. That is worth checking: people who continue working past pension age sometimes pay NI they do not owe for months before anyone notices.

Pension

Workplace pension contributions appear here. There are two ways they can be processed, and the difference shows up in your take-home:

Net pay arrangement — the contribution comes off before tax is calculated. You get tax relief automatically at your marginal rate, but you still pay NI on the full salary.
Salary sacrifice — you formally give up part of your salary and your employer pays it into the pension instead. Because your salary is now lower, you pay less NI as well as less tax. Your gross pay on the payslip will show the reduced figure.
Relief at source — the contribution comes off after tax, and the pension provider claims basic-rate relief back from HMRC. Higher-rate taxpayers have to claim the extra relief themselves through self-assessment, and many never do.

Which one your employer uses is worth knowing. Under relief at source, a 40% taxpayer who never files a return is leaving half their tax relief unclaimed every year.

Student loan

Deducted at 9% of income above your plan's threshold (6% for postgraduate loans). For 2026/27 the thresholds are £26,900 for Plan 1, £29,385 for Plan 2, £33,795 for Plan 4, £25,000 for Plan 5, and £21,000 for postgraduate loans. The payslip should show the plan type. If it is the wrong plan, you are being deducted at the wrong threshold — a Plan 1 borrower processed as Plan 2 pays too little and builds up a debt; the reverse overpays.

Like NI, this is calculated per period, not cumulatively, so bonus months take a larger deduction that is not later refunded.

Year-to-date figures

Most payslips show cumulative totals for the tax year: gross pay, tax paid, NI paid. These are what appear on your P60 and are the figures HMRC holds. If you want to check your tax is right, these are the numbers to put into a calculator — not this month's.

Net pay

What reaches your bank account. Gross pay minus tax, NI, pension, student loan and any other deductions such as a season ticket loan repayment or childcare vouchers.

The two things worth checking every time your code changes

Does the tax code match your circumstances? A code that shrinks without a benefit-in-kind or known underpayment behind it is worth querying with HMRC. An emergency code that persists for more than a couple of months is worth chasing.
Does the NI category match your age? Category C from State Pension age. Nobody at your employer will notice if it is wrong.

Everything else on the payslip is arithmetic, and a take-home pay calculator will reproduce it to within a pound or two for a standard month. If it does not, one of the two items above is usually the reason.