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Why are my payslip deductions so high? A line-by-line breakdown
7 min read
From April 2026, the National Living Wage increased to £12.71 per hour for workers aged 21 and over — a 4.8% increase on the previous rate of £12.21. On paper, a full-time worker now earns £26,437 per year at this rate. In practice, after PAYE deductions, the number that hits your bank account is quite different.
This guide breaks down exactly what minimum wage workers in every situation actually take home — including the impact of student loans, pension contributions, and different hours arrangements.
The 2026 minimum wage rates in full
| Worker age | Rate per hour | Annual (40hrs/week) |
|---|---|---|
| 21 and over (National Living Wage) | £12.71 | £26,437 |
| 18–20 (National Minimum Wage) | £10.00 | £20,800 |
| Under 18 | £7.55 | £15,704 |
| Apprentice | £7.55 | £15,704 |
Take-home pay on the National Living Wage (£12.71/hr, 40hrs/week)
Gross annual: £26,437
- Income Tax (20% on earnings above £12,570): −£2,773/year
- National Insurance (8% on earnings between £12,570–£50,270): −£1,109/year
- Workplace pension (5% auto-enrolment minimum, on qualifying earnings): −£694/year
Monthly take-home (after tax, NI, pension): approximately £1,824
Annual take-home: approximately £21,882
That's 82.8% of gross pay — or a 17.2% effective total deduction rate. This is notably lower than the effective rate for higher earners because a large part of your income (the first £12,570) is completely tax-free.
What about part-time and zero-hours workers?
| Hours per week | Gross monthly | Monthly take-home (est.) |
|---|---|---|
| 16 hours | £880 | £856 (no tax, minimal NI) |
| 20 hours | £1,101 | £1,062 |
| 25 hours | £1,376 | £1,297 |
| 30 hours | £1,651 | £1,523 |
| 40 hours | £2,203 | £1,824 |
Estimates based on 2026/27 rates. Pension included at 5% qualifying earnings for full-time workers; pension threshold applies proportionally for part-time.
The pension question: should you opt out?
Automatic enrolment requires most workers over 22 who earn above £10,000 to be enrolled in a workplace pension. At minimum wage, you contribute roughly £694/year (5% of qualifying earnings). Your employer adds at least another £416 (3%) — free money you lose if you opt out. The government adds basic rate tax relief on top of that.
Opting out saves you about £58/month but costs you roughly £93/month in combined employer contributions and tax relief. On balance, staying enrolled is almost always better — even on a tight budget.
Does minimum wage affect student loan repayments?
At £26,437 gross, a Plan 2 student loan starts repayments since the threshold is £29,385. So full-time minimum wage workers on Plan 2 make no repayments in 2026/27 — the earnings are below the threshold.
For Plan 1 (pre-2012 graduates), the threshold is £26,900. A full-time minimum wage worker on Plan 1 would repay 9% on £26,437 − £26,900 — which means they're also just below, so again no repayment is due.
Frequently asked questions
What is the minimum wage for under-21s in 2026?
Workers aged 18–20 must receive at least £10.00/hour. Under-18s and apprentices get £7.55/hour. Employers who pay less are breaking the law and can be fined and named publicly by HMRC.
Is the minimum wage going up again in 2027?
The government has committed to raising the National Living Wage toward two-thirds of median earnings. The Low Pay Commission is expected to recommend another rise for April 2027, likely in the £13.00–£13.40 range.
How do I check if my employer is paying me the minimum wage?
Divide your total pay (before deductions) by the total hours you worked. If the result is below £12.71 and you're 21 or over, contact ACAS or HMRC's National Minimum Wage helpline on 0800 917 2368.
Can my employer deduct money that takes me below minimum wage?
No. Deductions for uniform, tools, or other work expenses cannot reduce your pay below the minimum wage. Only deductions you've agreed to that are for your own benefit (e.g., pension) are allowed to reduce net pay.
Use our take-home pay calculator to get the exact monthly figure for your specific hours and circumstances.