How to read your payslip
Your payslip is the receipt for your work — but it’s written in a code most of us were never taught to read. That’s a problem, because payroll mistakes are common, and if you don’t check, nobody else will. This guide walks through every line, using the 2026/27 tax year figures, so you can tell in two minutes whether your pay is right.
This is information, not financial advice. Figures are for the 2026/27 tax year (England, Wales and Northern Ireland; Scotland has different income tax bands — see below). Always check your own payslip and speak to your payroll team or HMRC if something looks wrong.
The two numbers that matter most
Every payslip has a gross pay figure and a net pay figure.
Gross pay is what you earn before anything is taken off. Net pay — often labelled “take-home” — is what actually lands in your bank account. Everything in between is the deductions: tax, National Insurance, and often a pension and student loan. Understanding your payslip is really about understanding that gap.
Your tax code — the line to check first
Your tax code tells your employer how much of your pay is tax-free. For most people in 2026/27 it’s 1257L. The “1257” means you can earn £12,570 a year before you pay any income tax — that’s the Personal Allowance, and it’s frozen until 2030/31.
Here’s why it’s the first thing to check: if your code is wrong, every payslip is wrong. Watch for these:
- BR — every penny is taxed at the basic 20% rate, with no tax-free allowance. Sometimes correct for a second job; often a mistake on your main one.
- 0T — no allowance at all, taxed at your marginal rate. Common when you start a job and haven’t handed in a P45.
- W1, M1 or X on the end — an “emergency” code. It taxes each pay period in isolation, which can mean you overpay.
- A bigger or smaller number than 1257 — you may have a company benefit (like a car) or an underpayment being collected. Worth understanding why.
If your code looks off, check it in your free HMRC personal tax account. If you’ve overpaid, HMRC usually refunds it automatically, but chasing it can be faster.
Income tax — what the taxman takes
Once you earn above your allowance, income tax kicks in. For 2026/27 the bands (outside Scotland) are:
- £0 – £12,570: 0% (your Personal Allowance)
- £12,571 – £50,270: 20% (basic rate)
- £50,271 – £125,140: 40% (higher rate)
- Over £125,140: 45% (additional rate)
One catch worth knowing: once you earn over £100,000, your Personal Allowance shrinks by £1 for every £2 you earn, and disappears entirely at £125,140. That creates an effective 60% tax band in between — a nasty surprise for anyone getting a pay rise into six figures.
In Scotland, income tax has more bands and different rates. If you live in Scotland your tax code starts with an S — the calculator below handles both.
National Insurance — the other tax nobody explains
National Insurance (NI) is a separate deduction that pays towards the State Pension and some benefits. As an employee you’re on Class 1, and for 2026/27:
- You pay nothing on earnings up to £242 a week (about £12,570 a year).
- You pay 8% on earnings between £242 and £967 a week.
- You pay 2% on anything above £967 a week (about £50,270 a year).
Notice the rate drops to 2% once you’re a higher earner — the opposite of income tax. Your payslip also shows an NI category letter (usually “A”). Most people are on A; other letters apply in specific situations, so it’s worth a glance.
Pension — the deduction that’s actually yours
If you’ve been automatically enrolled, you’ll see a pension deduction. This one is different from tax: it’s your money, going into your pot.
Under auto-enrolment, the minimum total contribution is 8% of your qualifying earnings, made up of at least 3% from your employer and the rest from you (with tax relief topping it up). Many employers pay more than the minimum — and often they’ll match extra contributions you make. If yours does, paying below the match is one of the few genuinely free lunches in personal finance: you’re leaving employer money on the table.
If your pension is set up by salary sacrifice, you’ll see your gross pay reduced before tax and NI are worked out, which saves you a little NI too. It’s a common and legitimate setup.
Student loan — check the plan
If you’re repaying a student loan, you pay 9% of everything you earn above a threshold (6% for a Postgraduate Loan). The threshold depends on your plan — and being on the wrong plan is one of the most common payslip errors, especially after a job move. For 2026/27:
| Plan | You start repaying above | Rate |
|---|---|---|
| Plan 1 | £26,900 | 9% |
| Plan 2 | £29,385 | 9% |
| Plan 4 (Scotland) | £33,795 | 9% |
| Plan 5 | £25,000 | 9% |
| Postgraduate Loan | £21,000 | 6% |
Plan 5 is new for many people — it’s for students in England who started courses on or after 1 August 2023, and repayments began in April 2026. If you’re not sure which plan you’re on, the Student Loans Company can tell you.
The other lines worth knowing
- Payroll/employee number — your reference if you ever query pay.
- NI number — your unique lifetime number (format: two letters, six digits, one letter). Make sure it’s yours.
- Tax period — which month/week of the tax year this is (the tax year runs 6 April to 5 April; month 1 is April).
- Year to date (YTD) — running totals of pay and deductions so far this tax year. Handy for spotting a figure that’s drifted wrong over several months.
So — is your payslip right?
Run this quick check: does your take-home roughly match what it should be for your salary? The fastest way to find out is to put your salary into our calculator and compare.
Check your take-home with the salary calculator →
If the numbers are miles apart, the usual culprits are the tax code or student loan plan — both fixable with a call to HMRC or your payroll team.
Last checked 23 July 2026 for the 2026/27 tax year. Rates and thresholds can change at fiscal events; we date every figure so you always know how current it is.
Sources
Just so you know: this guide is information and journalism, not financial advice, and we don't recommend specific financial products. Your circumstances are your own — if you need personal advice, speak to a suitably qualified adviser. Information was correct at the "last updated" date above but things change; always check the linked primary sources.