What does PAYE mean on my payslip?

PAYE stands for Pay As You Earn. It is the system HMRC uses to collect income tax and National Insurance directly from your wages before you receive them.

How do I check if my tax code is correct?

You can check your tax code by looking at your payslip, P45, or P60. The standard tax code for the 2026/27 tax year is 1257L. If your code is different, you should verify it using a tax code checker or by contacting HMRC.

Why is my National Insurance so high?

National Insurance (NI) is calculated based on your earnings and your NI category. If you earn over the Primary Threshold (£1,048/month), you pay 8% on earnings up to the Upper Earnings Limit (£4,189/month) and 2% above that.

What is salary sacrifice?

Salary sacrifice is an arrangement where you agree to reduce your gross pay in exchange for a non-cash benefit, such as employer pension contributions. This reduces both your income tax and National Insurance contributions.

How can I reduce my tax bill?

You can reduce your tax bill legally by increasing your pension contributions (especially via salary sacrifice), claiming work-related expenses, or using schemes like Cycle to Work.

UK Payslip Explained

A complete, line-by-line guide to understanding your UK payslip for the 2026/27 tax year. We break down the jargon, the tax codes, and the deductions.

Your payslip is one of the most important financial documents you receive, yet for many, it looks like a confusing wall of numbers and acronyms. Whether you've just started your first job in the UK or you've been working for years, understanding exactly where your money goes is crucial. Millions of pounds in tax are overpaid every year simply because people don't know how to check their payslips.

In this comprehensive guide, we will walk you through a standard UK payslip, explaining every section, every deduction, and what to do if you spot a mistake.

EMPLOYEE NAME: Jane Doe
NI NUMBER: AB 12 34 56 C

TAX CODE: 1257L
DATE: 31/05/2026

PAYMENTS

Basic Pay£3,000.00

Bonus£500.00

DEDUCTIONS

PAYE Tax-£448.60

National Insurance-£196.16

Pension-£150.00

NET PAY: £2,705.24

1. Personal Information & Identifiers

The top of your payslip contains vital identifying information. It is essential that this is correct, as it links your pay to your HMRC tax record.

National Insurance (NI) Number: Your unique identifier (e.g., AB 12 34 56 C). This ensures your tax and NI contributions are recorded against your name, building your State Pension entitlement.
Payroll Number: The number your employer uses to identify you on their payroll system.
Tax Period: Usually expressed as a month number (e.g., Month 1 is April, Month 12 is March) or a week number.

2. Your Tax Code

This is arguably the most important element on your payslip. Your tax code tells your employer how much tax-free allowance you have before they start deducting income tax.

For the 2026/27 tax year, the standard code is 1257L. This means you can earn £12,570 a year (£1,048 a month) before paying any income tax. If your code ends in 'W1', 'M1', or 'X', you are on an emergency tax code. If your code is 'BR', you are being taxed at 20% on everything you earn, with no tax-free allowance.

Check your tax code instantly with our free tool →

3. Payments (Gross Pay)

The 'Payments' or 'Gross Pay' section shows all the money you have earned before any deductions are taken off.

Basic Pay: Your standard salary or wages for the period.
Overtime: Any extra hours worked. Check how much tax you pay on overtime.
Bonus/Commission: Performance-related pay. Calculate the tax on your bonus.
Statutory Pay: Payments like Statutory Sick Pay (SSP) or Statutory Maternity Pay (SMP).

4. Deductions

This is where your money goes. Deductions are taken from your Gross Pay to calculate your Net Pay.

PAYE Tax: Income tax collected by HMRC. The amount depends on your tax code and your earnings. In the UK, you pay 20% basic rate, 40% higher rate, or 45% additional rate tax.
Think it's wrong? Find out if you're overpaying tax.
National Insurance (NI): This pays for state benefits and the NHS. Most employees pay 8% on earnings between £1,048 and £4,189 a month, and 2% above that.
Read our full National Insurance guide.
Pension: Your workplace pension contribution. This might be deducted via 'Salary Sacrifice' (which saves you NI), 'Net Pay Arrangement', or 'Relief at Source'.
Confused? See our Pension Deductions Explained page.
Student Loan: If you earn above your plan's threshold (e.g., £28,470 for Plan 2), 9% of everything you earn above that threshold is deducted to repay your student loan.

5. Net Pay (Take-Home)

The bottom line. This is the amount that actually lands in your bank account. It is your Gross Pay minus all your Deductions.

Does your payslip look right?

Use our instant, private calculator to check if your employer has calculated your Net Pay correctly.

Calculate My Take-Home Pay →

6. Year-to-Date (YTD) Figures

Most payslips also show 'Year-to-Date' (YTD) totals. The tax year runs from April 6th to April 5th.

These figures show your total Gross Pay, total Tax paid, and total NI paid since the start of the current tax year. These cumulative figures are what HMRC uses to ensure you pay the correct amount of tax over the whole year, rather than just in a single month.

Last updated: May 2026. This guide uses the official HMRC tax rates and thresholds for the 2026/27 tax year.

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