Understanding your UK payslip, tax codes and PAYE

Your first UK payslip can be confusing - the amount that lands in your bank account is usually less than the salary you were told. This guide explains what each part of a payslip means, so you can check you are being paid and taxed correctly.

Gross pay vs net pay

Gross pay is your total earnings before anything is taken off. Net pay (sometimes called “take-home pay”) is what you actually receive after deductions. The difference is mostly tax, National Insurance and any pension contributions. Knowing both numbers helps you budget and spot mistakes.

PAYE: income tax and National Insurance

Most employees are taxed through PAYE (Pay As You Earn), which means tax is taken out before you are paid. The two main deductions are:

• Income Tax - you pay tax on earnings above a tax-free amount (the “personal allowance”), with higher rates on higher earnings. The exact allowance and rates are set each year, so check the current figures on GOV.UK Income Tax.
• National Insurance (NI) - a separate deduction that counts towards things like the State Pension. It also has earnings thresholds that can change.

Your payslip should show these as separate lines, plus a National Insurance number once you have one.

Tax codes - and emergency tax

Your tax code (a short mix of numbers and a letter, shown on your payslip) tells your employer how much tax-free pay you should get. If the code is wrong, you may pay too much or too little tax.

New arrivals and people starting a first UK job are often put on an emergency tax code at first, which can mean paying more tax than you should for a while. The good news: this usually sorts itself out, and you can fix it faster by giving your employer the right starter information and checking your details with HMRC. Learn what the codes mean and how to correct them on GOV.UK Tax codes. If you overpaid, you can normally get the money back.

Pension and other deductions

If you have been auto-enrolled into a workplace pension, your pension contribution will also show on your payslip as a deduction - but unlike tax, that money is being saved for your future, with your employer adding on top. You might also see deductions for things like student loan repayments if they apply to you.

Checking you are not overpaying

• Check your tax code matches your circumstances, especially after starting a job or changing employer.
• Keep every payslip and your annual P60, and your P45 when you leave a job.
• You can view your pay and tax, and check or claim a refund, through your personal tax account on GOV.UK.
• If something looks wrong, contact HMRC - do not assume it will always correct itself.

Tax allowances, rates and thresholds change each year - treat any amounts here as general guidance and confirm the latest figures on the official GOV.UK pages.