How to Read Your UK Payslip: Tax Codes, Deductions and How to Spot an Error
Most people glance at one number on their payslip and file the rest under "probably fine". That is how errors survive for years. A wrong tax code, a student loan deduction on the wrong plan, a pension contribution that quietly stopped: none of those announce themselves. They just sit there taking money off you every month until somebody looks.
Payslips are legally required. Under the Employment Rights Act 1996 your employer must give you one on or before payday, showing your pay before and after deductions, the amount of any deduction that changes each time you are paid, and, if your pay varies with the hours you work, the number of hours those wages cover. That last requirement came in for pay periods from April 2019 and it matters enormously if you are on variable hours.
Here is how to read the thing properly, top to bottom.
The top section: who you are and what period this covers
Somewhere near the top you will find your name, your payroll or employee number, your National Insurance number and the pay date. You should also see a tax period or week number. Month 1 of the tax year is 6 April to 5 May, month 12 is 6 March to 5 April. Week 1 starts on 6 April.
Check your National Insurance number properly at least once. If a digit is wrong, your contributions may not be landing on your record, and your State Pension qualifying years depend on that record being right. It is a two second check that almost nobody does.
Gross pay: the number that is not yours
Gross pay is what you earn before anything comes off. It may be split into lines: basic pay, overtime, bonus, commission, shift allowance, holiday pay. If you are on variable hours, the hours figure should be there too.
Worth knowing: some deductions come off before tax is calculated and some come off after. A workplace pension under a net pay arrangement, salary sacrifice for a cycle scheme or additional pension, and payroll giving all reduce the pay your tax is worked out on. Student loan repayments and most other deductions do not.
Your tax code, and why it is the thing to check first
The tax code tells your employer how much tax-free income to give you across the year. The numbers are your tax-free amount with the last digit knocked off, so 1257L means £12,570 of Personal Allowance. The letter explains the situation.
| Code | What it means |
|---|---|
| 1257L | The standard code: full Personal Allowance of £12,570, one job, nothing unusual |
| M | You have received a transfer of 10% of your partner's Personal Allowance under Marriage Allowance |
| N | You have transferred 10% of your allowance to your partner |
| T | Your code includes other calculations, often the Personal Allowance taper above £100,000 |
| 0T | No Personal Allowance here: either it is used up, or a new employer does not have your details yet |
| BR | Everything from this job is taxed at basic rate, usually because it is a second job |
| D0 / D1 | Everything from this job is taxed at higher rate (D0) or additional rate (D1) |
| K | You have untaxed income worth more than your Personal Allowance, often a company car |
| NT | No tax is being taken from this income |
| S / C prefix | You pay Scottish (S) or Welsh (C) rates of Income Tax |
| W1 / M1 / X | Emergency code. Tax is worked out on that week or month alone, as if you earned it every period |
The two to watch are BR and the emergency codes. BR on your only job means you are paying 20% on every pound including the first £12,570, which costs you £2,514 a year until it is fixed. An emergency code after a job change usually sorts itself out once HMRC has your P45 or starter checklist details, but it can leave you short for a month or two.
Income Tax and National Insurance
For 2026/27, if you are taxed under the England, Wales and Northern Ireland rates, the bands are these. Scotland has its own bands and rates, so if your code starts with S the figures below will not match your payslip.
| Band | Taxable income | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
National Insurance is separate and works on each pay period rather than the year. On the standard category A, an employee pays nothing on earnings up to £242 a week (£1,048 a month), 8% on earnings between £242.01 and £967 a week (£1,048.01 to £4,189 a month), and 2% on anything above that.
The per-period thing catches people out. If you get a large bonus in one month, that month's NI is calculated as though you earn that much every month, so a chunk of it falls in the 2% band. Income Tax, by contrast, is normally cumulative and evens itself out across the year.
Student loan and postgraduate deductions
Your payslip should say which plan you are on. It matters, because the thresholds are a long way apart.
| Plan | Annual threshold | Monthly | Rate above it |
|---|---|---|---|
| Plan 1 | £26,900 | £2,241 | 9% |
| Plan 2 | £29,385 | £2,448 | 9% |
| Plan 4 (Scotland) | £33,795 | £2,816 | 9% |
| Plan 5 | £25,000 | £2,083 | 9% |
| Postgraduate Loan | £21,000 | £1,750 | 6% |
If you have both an undergraduate and a postgraduate loan, you pay both, so 15% of everything above the higher threshold. Being put on the wrong plan is a common payroll error, and it is worth checking against your Student Loans Company account rather than assuming.
A worked example: £34,000 a year, paid monthly
Say you earn £34,000, you are on 1257L, you contribute 5% to a workplace pension under a net pay arrangement, and you have a Plan 2 student loan.
- Gross pay for the month: £2,833.33
- Pension at 5% of gross: £141.67, leaving £2,691.66 as taxable pay
- Income Tax: £2,691.66 minus the £1,047.50 monthly tax-free amount is £1,644.16, taxed at 20%, so £328.83
- National Insurance: 8% of the gap between £1,048 and £2,833.33, so £142.83
- Student loan: 9% of £2,833.33 minus £2,448, rounded down to the pound, so £34
- Take-home: roughly £2,186
Note that National Insurance is calculated on the full £2,833.33, not on the figure after the pension, because a net pay arrangement reduces taxable pay but not NIable pay. Salary sacrifice is different: that reduces both, which is why sacrifice schemes leave most people slightly better off for the same contribution.
How to spot an error in two minutes
- Compare the tax code to last month. If it changed and you did not get a coding notice from HMRC, find out why.
- Check the year to date figures move sensibly. YTD gross should rise by roughly this month's gross. If it jumps or drops, something has been reprocessed.
- Check pension is actually going out. Auto-enrolment contributions stop if you are re-enrolled incorrectly after a break, and nobody tells you.
- Check the hours figure if your pay varies. Multiply hours by your rate and see if it matches the gross. This is where underpayment of the National Living Wage usually shows up: £12.71 an hour for anyone 21 or over from 1 April 2026, £10.85 for 18 to 20 year olds, £8.00 for under 18s and apprentices.
- Check any deduction you did not agree to. Employers can only deduct where the law requires it, the contract allows it, you agreed in writing beforehand, or it is recovering an overpayment.
If something is wrong
Start with payroll, in writing, with the payslip attached and the specific line you are querying. Most errors are genuine mistakes and get fixed in the next run.
If it is the tax code, that is HMRC's to change, not your employer's. Your personal tax account online lets you check what HMRC thinks your income and benefits are, and correcting that is usually what fixes the code. If you have overpaid across a tax year, HMRC sends a P800 tax calculation, generally between June and March of the following tax year, and refunds from there.
If it is a deduction you did not agree to and your employer will not put it right, that is potentially an unlawful deduction from wages. The time limit for an employment tribunal claim is short, three months less one day from the date of the deduction, and you have to contact Acas for early conciliation before you can bring a claim. Do not sit on it for six months hoping it resolves.
Once you know what your real take-home is, you can build a budget on it. The expense tracker works from the number that actually lands, and the budgeting guide covers what to do with it next.