Pay, tax and your payslip

Reading your payslip

Your employer must give you a payslip on or before payday. It must show your gross pay (before deductions), any deductions that can change from one payday to the next (such as tax and National Insurance), and your net pay (what you receive). If your pay varies with the hours you work, it must also show the hours paid for. Fixed deductions can be explained on the payslip or in a separate written statement.

Sources (checked 17 October 2026): GOV.UK – Payslips: employee rights (opens in new tab).

Tax codes

Your tax code tells your employer how much tax-free pay to give you. 1257L is the code used for most people with one job or pension. The numbers show your tax-free amount for the year (1257 stands for the £12,570 Personal Allowance); the letter shows your situation. HMRC starts with your Personal Allowance and takes off things like untaxed income and some company benefits. GOV.UK's example: a £1,570 medical insurance benefit from an employer leaves £11,000 tax-free, giving code 1100L.

• L: you're entitled to the standard Personal Allowance. S and C prefixes show Scottish and Welsh tax rates.
• BR, D0, D1: all income from that job is taxed at one rate (usually used for a second job or pension).
• 0T: your Personal Allowance has been used up, or your employer doesn't have the details to give you a code.
• M1, W1, X, NONCUM are emergency tax codes: you may pay the wrong amount until HMRC has your details.

GOV.UK says it's your responsibility to make sure you're paying the right amount of tax. It has a tool to check what your code means, and a page on what to do if you think your code is wrong. You'll be sent a P45 when you leave a job and your new employer uses it to work out your tax.

Sources (checked 17 October 2026): GOV.UK – Tax codes: what your tax code means (opens in new tab).

Income Tax: the stairs

Income Tax works like stairs: each rate applies only to the pounds inside its band. In England, Wales and Northern Ireland for 2026/27:

The Personal Allowance is reduced by £1 for every £2 of income over £100,000, and is zero from £125,140. Illustration: someone earning £50,270 pays (£50,270 − £12,570) × 20% = £7,540. If they earn £1,000 more, only that extra £1,000 is taxed at 40% – an extra £400 – so the bill is £7,940, not 40% of everything. Scotland has its own bands (see GOV.UK: Scottish Income Tax (opens in new tab)). The cheat sheet has these figures in one place.

Sources (checked 17 October 2026): GOV.UK – Income Tax rates and Personal Allowances (opens in new tab).

National Insurance

National Insurance (NI) is separate from Income Tax. It is how you build up entitlement to the State Pension and some benefits (see Pensions). For most employees in 2026/27 (category letter A):

Employers pay NI too, at 15% on pay above £96 a week (£417 a month) for most employees. Some categories (for example, apprentices under 25, under-21s and veterans) have different employer thresholds. Self-employed people pay Class 4 NI of 6% on profits between £12,570 and £50,270 and 2% above that. They don't have to pay Class 2 if profits are £7,105 or more (it's treated as paid); below that they can choose to pay voluntary Class 2 at £3.65 a week.

Sources (checked 17 October 2026): GOV.UK – National Insurance: how much you pay (opens in new tab); GOV.UK – National Insurance rates and categories (opens in new tab); GOV.UK – Rates and thresholds for employers 2026 to 2027 (opens in new tab); GOV.UK – Self-employed National Insurance rates (opens in new tab).

Minimum wage

From 1 April 2026 the legal minimum hourly rates are:

The rates change each April. Apprentices aged 19 or over who have finished their first year get the minimum wage for their age.

Sources (checked 17 October 2026): GOV.UK – National Minimum Wage and National Living Wage rates (opens in new tab).

Pension and student loan on your payslip

Workplace pension

Under automatic enrolment, if you're eligible your employer must put you in a workplace pension. The legal minimum is 8% in total of your "qualifying earnings" (the slice of pay between £6,240 and £50,270 in 2026/27), of which at least 3% comes from your employer. Many employers pay more. How your contribution is taken affects your payslip:

• Relief at source: you pay from pay that's already been taxed and the provider claims 20% basic-rate relief, so £80 from you becomes £100 in the pot.
• Net pay arrangement: your contribution comes out before tax, so you get relief straight away at your rate.

See Pensions and tax relief for more.

Student loan

Repayments come out of your gross pay once it passes the threshold for your plan: 9% of the amount over the threshold for Plans 1, 2, 4 and 5, or 6% for a Postgraduate Loan. Employers calculate it each pay period and round down to the nearest pound.

GOV.UK's monthly figures are rounded down; employers use the exact pay-period thresholds (for example £2,448.75 for Plan 2). The amount you owe doesn't change what you repay each month.

Sources (checked 17 October 2026): GOV.UK – Workplace pensions: what you, your employer and the government pay (opens in new tab); GOV.UK/DWP – Automatic enrolment earnings trigger and qualifying earnings band review 2026/27 (18 Dec 2025) (opens in new tab); GOV.UK – Repaying your student loan: how much you repay (opens in new tab); GOV.UK – 2026 to 2027: Student and Postgraduate Loan deduction tables (opens in new tab).

Take-home pay: an illustration

This is a worked example, not your payslip. Illustration: a £30,000 salary, paid monthly, with the standard 1257L code, a 5% employee pension contribution under relief at source (3% from the employer) and a Plan 2 student loan:

Tax: (£30,000 − £12,570) × 20% ÷ 12. NI: (£2,500 − £1,048) × 8%. Pension: 5% of qualifying earnings (£30,000 − £6,240) ÷ 12 = £99.00 gross, £79.20 after 20% relief; the employer adds 3% (£59.40). Student loan: (£2,500 − £2,448.75) × 9% = £4.61, rounded down to £4.

P45, P60 and P11D

• P45: given to you when you leave a job. It shows your pay, tax and tax code from 6 April to your leaving date. Your new employer uses it to work out your tax.
• P60: a summary of your pay and tax for the whole tax year (6 April to 5 April) from each employer you were working for on 5 April. Employers must provide it by 31 May.
• P11D: a form your employer files with HMRC if you receive taxable benefits (see company car tax).

Sources (checked 17 October 2026): GOV.UK – Your P45, P60 and P11D forms (opens in new tab).

Side income and Self Assessment

If you earn money outside your payslip, such as freelance work, you may not pay tax on small amounts thanks to the trading allowance: £1,000 of gross income a tax year from self-employment, casual services (for example babysitting or gardening) or hiring out personal equipment. It's one £1,000 allowance across all of your side income, not £1,000 per activity, and it's measured on income before expenses, not profit.

• If your gross trading income is £1,000 or less you generally don't need to tell HMRC.
• If it's more than £1,000 you must register for Self Assessment by 5 October following the end of the tax year, and file a tax return. You can then either deduct the £1,000 allowance or deduct your actual expenses – not both.
• Class 2 and Class 4 NI for the self-employed are usually paid through Self Assessment (see National Insurance). Student loan repayments on self-employed income are worked out from your return, too.

GOV.UK says a new online reporting tool is planned for people with side income between £1,000 and £3,000, but until it's live you still need to use Self Assessment. Check GOV.UK for the current position.

Sources (checked 17 October 2026): GOV.UK – Tax-free allowances on property and trading income (opens in new tab); GOV.UK – Self Assessment tax returns (opens in new tab); GOV.UK – Repaying your student loan: how much you repay (opens in new tab).