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Your payslip can be confusing — but every figure on it
has a clear meaning. This guide explains each line
simply and clearly so you know exactly where your money
is going.
What is a payslip?
A payslip is a document your employer must legally
provide every time you are paid. It shows your gross
pay — what you earned before deductions — and your net
pay — what you actually receive — along with a breakdown
of every deduction made.
In the UK, employers are legally required to provide
payslips to all employees under the Employment Rights
Act 1996. Since April 2019, this right was extended to
workers as well as employees.
Key terms on your payslip
Gross pay is your total earnings before any deductions
— including your basic salary, overtime, bonuses and
commission.
Income tax (PAYE) is the tax deducted under Pay As You
Earn — based on your tax code and how much you’ve
earned in the tax year so far.
National Insurance is your contribution to the state
system that funds the State Pension, the NHS and other
benefits.
Pension shows your auto-enrolment or voluntary pension
contribution — the amount deducted from your pay before
it reaches your bank account.
Student loan repayments are deducted automatically if
your earnings exceed your plan’s repayment threshold.
Net pay is what actually lands in your bank account —
your gross pay minus every deduction listed above.
Understanding your tax code
Your tax code is one of the most important things on
your payslip — but most people have no idea what it
means.
The most common tax code is 1257L. This means you have
a personal allowance of £12,570 — the amount you can
earn each year before paying any income tax.
Here is what the letters mean:
L means you are entitled to the standard personal
allowance.
M means you have received 10% of your partner’s
personal allowance through Marriage Allowance.
N means you have transferred 10% of your personal
allowance to your partner.
T means HMRC needs to review your tax code.
BR means all your income from this job is taxed at
the basic rate of 20% — often used for second jobs.
D0 means all your income from this job is taxed at
the higher rate of 40%.
K means you have income that is not being taxed
another way — your personal allowance is reduced as
a result.
W1 or M1 is an emergency tax code — you may be
paying too much tax and should contact HMRC.
If your tax code does not look right, contact HMRC on
0300 200 3300 or check your Personal Tax Account at
gov.uk.
National Insurance — what are you paying for?
National Insurance contributions fund the State Pension,
the NHS, Jobseeker’s Allowance, Employment and Support
Allowance, Maternity Allowance and bereavement benefits.
As an employee in 2026/27 you pay 8% on earnings
between £12,570 and £50,270, and 2% on anything above
£50,270.
Your employer also pays National Insurance on your
behalf — this does not appear on your payslip, but it
represents a significant additional cost on top of
your salary.
Pension contributions on your payslip
Under auto-enrolment, if you are eligible your employer
must enrol you in a workplace pension. The minimum
contributions in 2026/27 are 5% from you and 3% from
your employer — a total of 8% of your qualifying
earnings.
If your employer uses salary sacrifice, your gross pay
shown on the payslip may already be reduced before
deductions are calculated. This means you pay less
income tax and National Insurance — which is why
salary sacrifice is often the most tax-efficient way
to contribute to a pension.
Cumulative figures — what do they mean?
Many payslips show cumulative totals — the total
amount you have earned and the total tax and NI you
have paid since the start of the tax year on 6 April.
These figures are used by HMRC to make sure you pay
the right amount of tax across the full year.
What to do if your payslip looks wrong
If you think you are paying too much tax, check your
tax code first. An incorrect tax code is the most
common reason people overpay.
If you have recently started a new job, changed your
hours, or had a change in circumstances, contact HMRC
to make sure your tax code is correct.
You can also use the Payslp salary calculator to check
whether the figures on your payslip match what you
should be paying — simply enter your salary and
deductions and compare.