Your UK Payslip Explained: Pay, Deductions and Tax Codes
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Understand gross pay, tax, National Insurance, pensions and student loans, with a clearly stated £36,000 example.
Your payslip shows pay before deductions, the amounts taken off and the take-home pay sent to your bank. Check the pay period first: a monthly payslip can differ from one-twelfth of an annual estimate because of bonuses, changing hours or earlier tax adjustments.
Gross pay and take-home pay
Gross pay is your pay before deductions. It can include basic salary, overtime, commission and bonuses. Taxable pay and pay used for National Insurance can differ from the headline gross figure, particularly where pension arrangements or taxable benefits apply.
Net pay is the amount left after the deductions on the payslip. Employer pension contributions and employer National Insurance are separate employer costs, rather than deductions from your agreed gross salary.
A £36,000 example
For 2026/27, assume England, Wales or Northern Ireland, the standard Personal Allowance, no pension, no student loan and a typical employee below State Pension age. Using annual thresholds:
| Item | Annual estimate | Monthly average |
|---|---|---|
| Gross pay | £36,000 | £3,000 |
| Income Tax | £4,686 | £390.50 |
| Employee National Insurance | £1,874.40 | £156.20 |
| Take-home pay | £29,439.60 | £2,453.30 |
Scotland has different Income Tax bands. Actual payroll calculations use the relevant pay period and your tax code. Check HMRC's rates.
Why an annual calculator can differ from your payslip
For a monthly paid employee in the usual NI category, HMRC's 2026/27 monthly NI thresholds are £1,048 and £4,189. They are not exactly one-twelfth of the annual thresholds. On £3,000 monthly pay, (£3,000 − £1,048) × 8% gives £156.16 of employee NI. The annual illustration above averages £156.20 a month: a 4p difference does not establish a payroll error.
Pay timing can create a larger difference. Consider two non-director employees below State Pension age with the same £36,000 annual pay, usual category A NI and no salary sacrifice. Assume monthly pay periods throughout 2026/27:
| Pay pattern | NI in each ordinary month | NI in the bonus month | Total employee NI |
|---|---|---|---|
| £3,000 in all 12 months | £156.16 | No separate bonus month | £1,873.92 |
| £2,500 in 11 months and £8,500 in one month | £116.16 | £337.50 | £1,615.26 |
For the £8,500 month, NI is £3,141 × 8% plus £4,311 × 2% = £337.50. The second total is 11 × £116.16 + £337.50 = £1,615.26. The bonus takes part of one month's pay above the monthly upper earnings limit, where the rate falls to 2%.
This is a pay-period illustration using HMRC's published thresholds, not a claim that you can choose how an employer runs payroll. Directors and some other circumstances have different rules. Income Tax has its own cumulative calculation: the NI difference does not imply a matching Income Tax difference. Our annual salary estimate does not reconstruct this irregular payroll schedule.
Pension and student loan deductions
For a pension, confirm both the contribution rate and the earnings it applies to. Salary sacrifice reduces contractual cash pay. Net pay contributions reduce pay before Income Tax, while relief-at-source contributions are taken after tax and the provider adds basic-rate relief. These methods do not all reduce National Insurance. See the pension guide.
For 2026/27, a Plan 2 student loan uses a £29,385 annual threshold and a 9% repayment rate. Other plans have different thresholds, and a postgraduate deduction can run alongside an undergraduate deduction. Check the plan in your repayment account and our student loan examples.
Tax code and year-to-date totals
1257L normally represents the standard £12,570 Personal Allowance. A different code can be correct: benefits, other income or earlier tax owed can change it. W1, M1, X or NONCUM means payroll works out tax for the current period without a cumulative calculation. It does not automatically mean you have lost all your allowance.
Year-to-date totals show pay and deductions so far in the tax year. They help explain refunds or extra deductions that a simple monthly comparison misses. See GOV.UK's tax code guide.
If something looks wrong
Check the salary and hours against your contract, confirm the pension method and compare net pay with your bank payment. Ask payroll to explain unexpected items. Check HMRC's income and tax-code records if the code or employment details look wrong.
Our salary calculator provides a useful estimate. Agreement with it does not prove a tax code is right, and a difference does not by itself prove payroll is wrong.