UK Payslip Explained: Every Line Decoded

Why Every Employee Should Read Their Payslip

By law, every UK worker must receive an itemised pay statement on or before payday (Employment Rights Act 1996, s.8). Yet a 2024 survey by the Chartered Institute of Payroll Professionals found that nearly half of UK employees never look beyond the «net pay» figure. Errors in tax codes, student-loan plans, pension contributions and statutory pay are routine — and almost always cost the employee, not the employer. Treat your payslip as a personal financial document: keep at least the last six payslips electronically and store P60s indefinitely as they prove your earnings history to HMRC, mortgage lenders, immigration and the DWP for State Pension purposes.

This guide walks line-by-line through a typical UK payslip for the 2025/26 tax year, calling out the figures and abbreviations that most often go unnoticed.

Top Section: Identification

• Employee name & number: internal employer reference
• National Insurance Number (NINO): AB123456C format. Check accuracy!
• Tax code: 1257L is standard; M/N for Marriage Allowance; S/C for Scotland/Wales; W1/M1/X for emergency; BR/D0/D1 for second jobs; K-prefix for negative allowance. See our Tax Codes Guide.
• Pay period & date: «Period 4» = month 4 of tax year (so July if April year-start). Tax year always 6 April to 5 April.
• PAYE reference: employer\'s HMRC reference, e.g. 123/AB45678

Earnings Section

• Basic pay / Salary: contractual gross monthly pay
• Overtime: additional hours, often at premium rates (1.5× or 2×)
• Bonus: performance/discretionary, taxed at marginal rate
• Holiday pay: paid annual leave, separately itemised in some employers
• Sick pay: SSP (£118.75/wk minimum) or enhanced contractual
• Maternity/Paternity/Adoption pay: SMP/SPP/SAP — see Statutory Pay Guide
• BIK cash equivalent: if payrolling benefits-in-kind in real time
• Expenses reimbursement: usually non-taxable if HMRC-approved
• Gross pay (this period): total earnings before any deductions
• Gross pay (year to date): total since 6 April. HMRC sees this for tax code adjustments.

Deductions Section

Always shown as deductions FROM gross pay:

• Income tax (PAYE): based on tax code. £12,570 personal allowance spread across year. 20%/40%/45% bands.
• National Insurance (NI): Class 1 employee 8% / 2%. From £242/wk threshold.
• Pension contribution: typically 5% (auto-enrolment) or higher. Net pay or relief at source method affects tax relief timing.
• Student loan: 9% above plan-specific threshold (or 6% for postgrad). Shows plan number e.g. «SL Plan 2».
• Salary sacrifice items: EV lease, cycle to work, holiday buy — reduces gross pay before tax/NI calculated (so saves both)
• Court orders / attachment of earnings: if applicable (CSA, child maintenance, fines)
• Charity Payroll Giving: tax-free at source
• Other deductions: private medical insurance contribution, share schemes (SAYE/SIP buying), Union dues

Net Pay (Take-Home)

Net pay = Gross − all deductions. This is the amount paid into your bank.

Use our Take-Home Pay Calculator to verify your net is correct.

Employer Section (Some Payslips)

Some employers also show:

• Employer NI contribution: 15% from April 2025 (was 13.8%) above £5,000 threshold. NOT deducted from you — but your «real cost to employer» is salary + this.
• Employer pension contribution: minimum 3% auto-enrolment, often more
• Apprenticeship Levy: 0.5% on employers with pay bills over £3m

Worked Example: £45,000 Salary in 2025/26

A typical English employee earning £45,000/year on tax code 1257L with a 5% auto-enrolment pension contribution and a Plan 2 student loan, paid monthly:

• Gross monthly pay: £3,750.00
• Pension (5% of qualifying earnings, net pay arrangement): −£187.50
• Taxable pay this period: £3,562.50
• Income Tax (£12,570 personal allowance, 20% band): roughly −£503
• Employee National Insurance (8% above £1,048/month): roughly −£293
• Student Loan Plan 2 (9% above £28,470/£2,372 monthly): roughly −£124
• Net pay (bank credit): ≈ £2,643

Use our Take-Home Pay Calculator to vary the assumptions for your situation.

Worked Example: £85,000 Salary with EV Salary Sacrifice

An employee on £85,000 sacrificing £6,000/year for an electric vehicle scheme, 5% pension contribution and no student loan:

• Gross monthly: £7,083; after £500 EV sacrifice: £6,583
• Pension 5%: −£329 (calculated on reduced pay)
• Taxable pay: £6,254; PAYE roughly −£1,503
• Employee NI (8% / 2%): roughly −£472
• BIK on EV at 3%: £450/year added via tax code adjustment (around £15/month extra PAYE)
• Net pay: ≈ £4,265 plus access to an EV worth ~£500/month on the open market

Common Payslip Errors to Check

• Wrong tax code — most common error. Check first payslip of new job for emergency code (W1/M1/X suffix) that should self-correct
• Wrong student loan plan — Plan 1 vs Plan 2 vs Plan 5 (especially common for grads from 2012-2023 cohort)
• Pension contribution not started — auto-enrolment can lag 1-3 months
• BIK forgot to be added — company car/insurance via P11D OR payrolled
• Overtime / bonus not included in pension qualifying earnings
• Sick pay shown as full pay when it should be SSP (or vice versa)

Year-End Documents

• P60: annual statement by 31 May — total pay/tax for the year
• P11D: by 6 July if you had Benefits in Kind
• P45: when you leave a job — pay/tax to leaving date
• Pension annual statement: typically January or April

What to Do If Something Looks Wrong

Always raise a payslip query in writing to your payroll department first — keep emails as evidence. If they are unwilling or unable to resolve it within a reasonable time (typically a pay cycle), you have several escalation routes:

• Tax code or PAYE issue: contact HMRC's Income Tax helpline (0300 200 3300) or sign in to your Personal Tax Account at gov.uk to view your current code and underlying calculation
• Student loan plan wrong: request a Start Notice from SLC (SL1) and ask payroll to update
• National Minimum Wage breach: ACAS helpline (0300 123 1100) and gov.uk NMW complaint route
• Pension auto-enrolment issue: The Pensions Regulator at thepensionsregulator.gov.uk
• Unpaid wages: first written claim, then ACAS Early Conciliation, then Employment Tribunal within 3 months less one day

HMRC can recoup historic underpayments of Income Tax through the next year's tax code (capped at £3,000-£17,000 depending on income band), or pay refunds direct to your bank account.

FAQs