Your payslip is a legal document that your employer must give you every time you are paid. It breaks down exactly what you have earned, what has been deducted and why, and what ends up in your account. Most people file it without looking at it properly. That is understandable, but it means missing information that can actually affect your finances.
The gross pay figure
Your gross pay is your total earnings before any deductions. If you are on a salary, this will be your annual salary divided by 12. If you work variable hours, it reflects your actual hours worked. Check that this figure matches your contract or what you agreed for the pay period. If there is a discrepancy, that needs to be queried with your employer or HR. Mistakes do happen.
Income tax
Your payslip will show how much income tax has been deducted. It should also show your tax code, which is usually a number followed by a letter, such as 1257L. This code tells your employer how much tax-free income you are entitled to. 1257L is the standard code for most employees in 2024 to 2026, reflecting the £12,570 personal allowance. If your code looks wrong, for example if it is an emergency code like BR or 0T, that means you may be paying too much tax and should contact HMRC.
National Insurance
National Insurance contributions are separate from income tax and fund state benefits including the NHS and State Pension. They appear on your payslip as a separate deduction, usually labelled NI or National Insurance. The amount depends on your earnings and the contribution rate in force at the time. You do not pay National Insurance on earnings below the primary threshold, which changes each tax year.
Pension contributions
If you are enrolled in a workplace pension, your contribution will appear as a deduction on your payslip. Your employer's contribution is usually shown separately for information only. Make sure the percentage being deducted matches what you agreed to contribute. If you have recently increased your contribution and it is not showing correctly, flag it with your payroll team.
Other deductions
Some payslips include additional deductions such as student loan repayments (Plan 1 or Plan 2), salary sacrifice arrangements, childcare vouchers, or cycle-to-work scheme repayments. Make sure you recognise every line on your payslip. Any deduction you cannot identify should be queried with your employer before assuming it is correct.
Keep your payslips
Hold onto your payslips. They are useful for mortgage applications, loan applications, benefits assessments, and checking your National Insurance record. Digital payslips can be downloaded and saved as PDFs. Paper payslips are worth scanning or photographing. HMRC recommends keeping payroll records for at least six years.
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Ask Fin provides general guidance only. For personalised tax advice, consult HMRC or a qualified tax adviser.