Written and reviewed by James Whitfield · Updated for 2026/27 · Editorial standards · Methodology
A plain-English guide to every deduction on a UK payslip, PAYE income tax, National Insurance, student loan, pension, tax codes and what to check when the numbers look wrong.
Every line on a UK payslip has a specific source and logic. This guide explains income tax, NI, student loan, pension deductions and how to troubleshoot when the numbers look wrong.
UK law requires payslips to show gross pay, each deduction separately, and net pay. Since April 2019, payslips also need to show hours worked for employees paid by the hour. What payslips do not always show clearly is how each deduction was calculated, HMRC expects employees to understand their tax code, but does not require employers to print the calculation methodology on the slip.
The key lines to understand are: gross pay (before deductions), income tax (PAYE), National Insurance contributions (NI or NICs), and net pay. Additional lines may include student loan repayment, pension contributions, salary sacrifice amounts, benefits deductions, and attachment of earnings orders. Some of these reduce gross pay before tax (salary sacrifice), while others are deducted after tax calculation (standard pension contributions).
A common source of confusion is year-to-date figures. Payslips typically show both monthly amounts and cumulative year-to-date totals. The YTD income tax figure is particularly useful for spotting whether you are on track to have paid the right amount of tax across the year, if it looks much higher or lower than expected relative to your annual salary, it may indicate a tax code issue worth querying.
The most important line on your payslip for income tax purposes is your tax code. The standard code for 2026/27 is 1257L, which means you have a personal allowance of £12,570. The number in the code is the allowance divided by 10 (rounded down). The letter indicates how the allowance is applied: L means the standard tax-free personal allowance, M means you receive a 10% transferred allowance from a spouse, and N means 10% has been transferred away.
Emergency codes appear as 1257L W1 or M1 (week 1 or month 1 basis), which means HMRC has not received full tax history and is calculating tax on each pay period in isolation rather than cumulatively. This can cause overpayment in some periods, though it usually self-corrects when a proper cumulative code is issued. BR, D0 and D1 codes indicate a second job or that all income is taxed at basic, higher or additional rate without personal allowance.
If your tax code is wrong, every payslip deducts the wrong amount. A code that is too low (e.g. 800L instead of 1257L) will overtax you each month. A code that is too high will undertax you, and HMRC can reclaim the difference at year-end. Checking your tax code on your payslip against HMRC's own record (via the Personal Tax Account) is a quick and important sense-check.
Employee NI is calculated entirely separately from income tax. For 2026/27, employees pay 8% NI on weekly earnings between £242 and £967 (equivalent to £12,570–£50,270 annually). Above £967 per week (£50,270/year), the rate drops to 2%. There is no NI on earnings below the primary threshold.
The fact that NI has the same lower threshold as income tax (£12,570) but its own upper threshold (£50,270) creates the combined marginal rate effect that catches many people by surprise. Below £50,270, you are effectively paying 28% in combined income tax and NI (20% + 8%). Above £50,270, you pay 42% combined (40% + 2%). That shift from 28% to 42% on the next pound is worth understanding before negotiating a pay rise near this threshold.
One payslip detail that confuses people is that NI can look different from month to month even with the same salary. This is because NI is calculated per pay period (not cumulated like income tax), so a month with additional payments, an expense reimbursement counted as earnings, or an incorrect payroll entry, can produce a different NI figure. Most one-off variations self-correct in the next payroll run.
If you have a student loan, repayments are deducted through payroll and appear as a separate line on your payslip. The amount depends on which repayment plan you are on. Plan 2 (for English and Welsh graduates who started in or after September 2012) charges 9% on annual earnings above £27,295 for 2026/27. On a salary of £35,000, that is 9% of £7,705 = £693 per year, or approximately £57.75 per month.
Plan 1 (pre-2012 graduates and some Scottish/EU graduates) has a lower threshold of £24,990. Plan 4 (Scottish graduates) has a higher threshold of £31,395. Plan 5 (new students from August 2023) has a threshold of £25,000 but a 40-year repayment term. Postgraduate loans have a separate 6% repayment on earnings above £21,000.
HMRC allocates plan type based on what the Student Loans Company tells them. If the wrong plan is being used in payroll, you could be repaying too much or too little. Check your payslip plan code against your student loan documentation, it should match the confirmation letter you received when you started repaying.
Pension contributions appear on payslips in two different ways depending on how your employer's scheme works. With salary sacrifice, your contractual gross salary is reduced before tax and NI are applied. This means the pension line on your payslip shows a reduction in gross pay, and both your income tax and NI are calculated on the lower number. Net pay increases slightly compared with a non-sacrifice arrangement at the same contribution rate.
With a relief-at-source scheme, the pension contribution is deducted after tax. The payslip shows gross pay as normal, income tax on the full gross (before pension), and then the pension deduction as a separate line. The pension provider then reclaims basic-rate tax from HMRC on your behalf. For higher or additional rate taxpayers, you need to claim the additional tax relief through a Self Assessment return.
The practical check: if your payslip shows pension as a deduction after tax (reducing take-home directly), you are on a relief-at-source scheme. If the gross pay shown is already reduced to account for pension, you are on salary sacrifice. This matters for anyone comparing net pay estimates with a calculator, you need to set the pension type correctly to get an accurate comparison.
If an online estimate and your payslip do not match, work through the following in order. First, check the tax code on the payslip matches the 1257L standard or the code you have confirmed with HMRC. Second, check the region, Scottish taxpayers will see higher income tax deductions than an England-based estimate. Third, check the student loan plan type and confirm it matches your actual plan.
Fourth, check whether the pension is salary sacrifice or relief at source and whether the contribution rate matches. Fifth, check whether you are in the same pay period as the estimate assumes, partial months, start-of-employment periods and bonus months can all produce atypical deductions. Sixth, verify that the payroll frequency is monthly (not weekly or four-weekly) so the thresholds are being annualised correctly.
Most mismatches come from one of these six inputs being wrong. The most common single cause is an incorrect or outdated tax code. The second most common is a mismatch in student loan plan type. Running a clean check on these two items first resolves the majority of payslip discrepancies without needing to involve payroll directly.
Current tax-year thresholds used across this guide and calculator.
1257L is the standard income tax code for 2026/27. The number 1257 times 10 equals £12,570, your personal allowance. The letter L indicates you have the standard tax-free personal allowance. If your code is different, it means HMRC has adjusted your allowance for a specific reason (benefits, second income, expense claims).
The most common causes are: wrong tax code in the calculator, wrong region (Scottish tax is different), wrong student loan plan type, or different pension treatment (salary sacrifice vs relief at source). Work through these four inputs first before concluding there is a calculation error.
YTD figures show cumulative totals from the start of the tax year (6 April). The YTD income tax column is particularly useful, if your annual salary is £35,000 and your YTD income tax after 6 months is much higher or lower than half of the expected annual tax, it may indicate a tax code error or a one-off adjustment earlier in the year.
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Tax region, tax code, student loan plan, pension contribution and salary sacrifice are the key assumptions to check first.