Payslips can contain mistakes, and a wrong tax code can cost you hundreds of pounds a month that you are entitled to get back. Below is every line, with the 2026-27 figures.
Gross and net pay
Gross pay is what you earn before anything's taken off. Net pay (or ‘take-home’) is what reaches your account. The gap between them is income tax, National Insurance, pension contributions, and sometimes student loan or other deductions. Both numbers matter for different jobs: gross is what you negotiate on and what lenders assess for a mortgage; net is what your budget has to be built on.
Your tax code
Your tax code tells your employer how much you can earn tax-free before income tax kicks in. For most people in 2026-27 it's 1257L — the ‘1257’ is the £12,570 personal allowance with the last digit dropped, and the L just means the standard allowance applies. If yours looks different, there is a reason: for example a company benefit, a second job, or an error.
Codes to check.
- W1, M1 or X on the end — ‘emergency tax’, common after starting a new job. Each payday is taxed in isolation, ignoring the year so far, so you can overpay until it's fixed.
- BR — everything taxed at 20% with no tax-free allowance. Correct for many second jobs; expensive if it's wrongly on your main one.
- 0T — no allowance at all, often because your employer doesn't have the details they need from you.
- K codes — you owe tax on top (untaxed income or benefits), so extra tax is collected through your pay.
- M or N — Marriage Allowance: one partner has transferred £1,260 of their personal allowance to the other, worth up to £252 a year. M means you're receiving it, N means you've given it.
Check your code at GOV.UK — your personal tax account shows how it was worked out. If it looks wrong, contact HMRC; any overpayment is often refunded through a later payslip.
Income tax bands
Income tax is charged in slices. For 2026-27 in England, Wales and Northern Ireland (Scotland sets its own bands and rates):
- First £12,570 — 0% (your personal allowance)
- £12,571 to £50,270 — 20% (basic rate)
- £50,271 to £125,140 — 40% (higher rate)
- Over £125,140 — 45% (additional rate)
Only the money inside each band is taxed at that band's rate. A pay rise that nudges you over £50,270 does not tax your whole salary at 40% — just the pounds above the line. You keep most of every extra pound. (Two points at higher incomes: above £100,000 the personal allowance shrinks by £1 for every £2 you earn, disappearing entirely at £125,140 — and a higher income can affect Child Benefit; see Child Benefit — are you missing out?)
National Insurance
National Insurance is deducted separately from income tax. For employees in 2026-27 it's 8% of earnings between £242 and £967 a week — roughly £12,570 to £50,270 a year — and 2% on everything above that. Unlike income tax it's calculated per pay period rather than annually, which is why a bonus month can look oddly taxed. Your NI record builds your entitlement to the State Pension and some benefits, which is why gaps in it can matter later.
Pension
If you're aged 22 or over and earning above the trigger, auto-enrolment means a workplace pension line should appear on your payslip. The legal minimum is 8% of a band of your earnings in total, of which your employer must pay at least 3%. Opting out means losing the employer contribution and the tax relief on your own contribution. Check the line is there, and that an employer contribution sits alongside yours; then see what your pension needs to look like.
Student loan
If you have a student loan, repayments come through payroll automatically once you earn above your plan's threshold — currently £29,385 for Plan 2 (most English graduates from 2012 to 2022), £25,000 for Plan 5, £26,900 for Plan 1, £33,795 for Plan 4, all at 9% of income above the threshold; postgraduate loans repay 6% above £21,000. Check you are on the right plan. The plans' thresholds differ by thousands, so a wrong letter means wrong deductions every month. Your payslip or P60 shows the plan; check it against your loan paperwork.
Illustrative figures, 2026-27 rates, England, standard 1257L code, no student loan, and rounded to the pound. Real payslips vary with pension setup and benefits.
Income tax: £32,000 − £12,570 allowance = £19,430 taxable, all in the basic-rate band. £19,430 × 20% = £3,886 a year.
National Insurance: the same £19,430 sits between the NI thresholds. £19,430 × 8% = £1,554 a year.
Take-home: £32,000 − £3,886 − £1,554 = £26,560 a year, about £2,213 a month.
Now add a 5% pension (£1,600), taken before tax in a ‘net pay’ scheme: taxable pay drops to £30,400 − £12,570 = £17,830, so tax falls to £3,566 — £320 less. The £1,600 going into your pension only costs about £1,280 of take-home, and if your employer adds 3% of salary, another £960 lands in the pot on top.
1257LThe standard 2026-27 tax code. If yours differs and you don't know why, check it.
Annual payslip check
Once a year — a new job, a pay rise or every April are natural moments — run through this list against your latest payslip:
- Tax code: is it 1257L, or do you know exactly why it isn't? Check it against your personal tax account on GOV.UK.
- Emergency markers: any W1/M1/X still hanging around months after a job change? Ring HMRC.
- Pension line: present, with an employer contribution alongside yours?
- Student loan: right plan letter — and no deductions if you've paid it off?
- Personal details: correct National Insurance number and name — errors here can mean contributions credited to the wrong record.
- Year-to-date figures: do the cumulative pay and tax look roughly right for the point in the tax year?
- The net number: does take-home look about right against a calculator or last month? Look into any unexplained drop.
Contact HMRC when something looks wrong. For free, plain-English guidance on any line you don't recognise, MoneyHelper is the government-backed place to look. Your take-home figure is the basis of your budget and any goal you'll set.