How to Read Your UK Payslip: Every Line Decoded with a £35,000 Worked Example

By the UK Salary Take Home Editorial Team · Published 24 Mar 2026

Your payslip is the only document that proves your employer is paying you correctly — yet most employees never check it beyond the bottom-line number. A 2024 survey by the Chartered Institute of Payroll Professionals found that one in five UK workers has had an incorrect payslip at some point, with the average overpaid tax refund being £390.

This guide walks through every section of a typical UK payslip, explains what each line means, and shows you exactly where errors hide. We'll use a worked example throughout: an employee earning £35,000 per year with tax code 1257L, no pension, and no student loan.

1. The Header — Your Identity and Pay Period

The top of your payslip shows foundational information that rarely changes but should always be verified:

2. Payments — What You've Earned

The “Payments” or “Earnings” section lists every component of your gross pay for the period. Typical entries:

• Basic Pay: Your contracted salary divided by 12 (monthly) or by pay-period frequency. For our £35,000 example: £2,916.67/month.
• Overtime: Hours worked beyond your contract, usually at 1.5× or 2× your hourly rate. This is taxed as normal income — there is no special overtime tax rate.
• Bonus/Commission: Taxed in the month received, often at a higher marginal rate because it pushes that month's earnings into a higher cumulative band.
• Statutory Sick Pay (SSP): £116.75/week in 2026/27 if eligible. Replaces basic pay during qualifying sick leave.
• Statutory Maternity/Paternity Pay: Shown separately from basic pay. SMP is 90% of average weekly earnings for 6 weeks, then £184.03/week for 33 weeks.

3. Tax Code — The Most Important Number to Verify

Your tax code determines how much of your salary is tax-free. The standard code for 2026/27 is 1257L, meaning you get £12,570 of tax-free earnings per year (£1,047.50/month). If your code is different, your tax-free amount changes:

• 1257L: Standard — £12,570 annual allowance. Most common code.
• 1383L: Receiving Marriage Allowance — £13,830 annual allowance (see our Marriage Allowance guide).
• BR: All income taxed at Basic Rate (20%). Common for second jobs.
• K codes: You owe more tax than your allowance covers (e.g., benefits in kind or unpaid tax from previous years). The number after K is added to your taxable income.
• W1/M1: Emergency tax — non-cumulative basis. Each pay period is calculated in isolation without reference to year-to-date figures.
• S prefix: Scottish taxpayer (e.g., S1257L). D prefix = Welsh (C1257L).

For a deep dive into all tax code variations, see our complete tax code guide.

4. Deductions — Where Your Money Goes

This is the section most people skip — and where errors are most likely to hide. Each deduction line should be verifiable:

Income Tax (PAYE)

Calculated cumulatively across the tax year. For our £35,000 example in Month 3:

National Insurance (Employee)

NI is calculated per period (not cumulatively like tax). The monthly Primary Threshold for 2026/27 is £1,047.50:

Look for your NI category letter. If it says “C”, you're registered as over State Pension age and shouldn't be paying employee NI at all. If you're under 21, it should be “M” (no NI on earnings up to £50,270).

Pension Contributions

Your payslip may show pension deductions labelled differently depending on the scheme type:

• “Pension (Salary Sacrifice)”: Deducted before tax and NI. Your gross pay figure will already be reduced. Check that the percentage matches your arrangement.
• “Pension (Employee)”: Relief at source — deducted after tax. NI is still calculated on the full gross. Your pension provider claims the 20% tax back from HMRC.
• “Employer Pension”: Your employer's contribution — shown for information only and not deducted from your pay.

A common error: your employer sets up a 5% contribution on qualifying earnings (£6,240–£50,270) but you expected 5% of your full salary. On a £35,000 salary, 5% of qualifying earnings is £1,438/year — but 5% of gross salary is £1,750/year. That £312 annual gap accumulates over a career.

Student Loan Repayments

If you have a student loan, the payslip deduction line will usually say “SL” or “Student Loan.” The amount is 9% of income above your plan's threshold (or 6% for Postgraduate Loans). For our £35,000 example on Plan 2 (threshold £27,295):

If you've fully repaid your loan, check that the SLC has sent an SL0 stop notice to HMRC. Payroll departments sometimes continue deducting after repayment — you can claim overpaid amounts back from the Student Loans Company.

Other Common Deductions

• Cycle to Work / Tech scheme: Salary sacrifice for a bicycle or equipment. Reduces your gross pay like a pension sacrifice.
• Childcare vouchers: Legacy scheme (closed to new entrants since October 2018). Still shown on payslips for existing members.
• Court orders: Deductions for child maintenance (DEO — Deduction from Earnings Order) or debt recovery (AEO — Attachment of Earnings Order). Legally mandated; your employer cannot refuse.
• Union subscriptions: Deducted from net pay. You can claim tax relief on these via Self Assessment.

5. Net Pay — Your Take-Home Total

The bottom line is your gross pay minus all deductions. For our £35,000 example (no pension, no student loan):

Cross-check this against our salary calculator — enter £35,000 with tax code 1257L and the monthly net should be within £1–£2 of your payslip figure (differences are normal due to rounding in payroll software).

6. Year-to-Date Totals — Your Running Scoreboard

The “YTD” (year-to-date) section is the most powerful error-detection tool on your payslip. It shows cumulative totals from 6 April to the current pay date:

• Gross Pay YTD: Total earnings so far this tax year. Divide by the month number to check your average matches your expected monthly pay.
• Tax Paid YTD: Total Income Tax deducted. By Month 12 (March), this should match the annual tax shown by our calculator almost exactly.
• NI Paid YTD: Total employee NI. Again, should closely match our annual figure.
• Pension YTD: Total pension contributions. Check this against your annual statement from your pension provider — discrepancies mean money is going missing.

Pro tip: Check your March payslip's YTD tax figure against our calculator's annual tax. If there's a gap of more than £50, you may have an incorrect tax code, an uncorrected emergency tax period, or a payroll error worth investigating. Contact HMRC on 0300 200 3300 with your P60 (issued by 31 May) to investigate.

7. Employer Costs — The Hidden Numbers

Some payslips show employer-side costs. These don't reduce your pay but affect your total cost of employment:

• Employer NI: 15% on earnings above £5,000/year. On a £35,000 salary, that's £4,500/year your employer pays to HMRC on top of your salary.
• Employer Pension Contribution: Minimum 3% of qualifying earnings under auto-enrolment. On £35,000 that's at least £863/year going into your pension pot.
• Apprenticeship Levy: Only applies to employers with a pay bill over £3 million. You won't see this on your payslip but it affects large employers.

8. Five Payslip Errors to Watch For

1. Wrong tax code after a job change: If your employer didn't receive your P45, they may have put you on emergency tax (1257L W1/M1 or BR). You could be overpaying £200+/month until it's corrected.
2. Pension calculated on wrong earnings basis: 5% of qualifying earnings (£6,240–£50,270) produces a lower contribution than 5% of total pay. Check which basis your employer uses.
3. NI still deducted after State Pension age: Employees over State Pension age pay zero employee NI. If your category letter is still “A” instead of “C”, your employer is deducting NI incorrectly.
4. Student loan deductions after full repayment: The SLC can take 2–3 months to issue an SL0 stop notice. Overpayments are refundable but you need to claim them.
5. Benefits in kind double-counted: If your employer deducts tax for a company car through payroll and HMRC also adjusts your tax code for the same benefit, you're paying twice. Check your P11D against your tax code.

If you spot any discrepancy, raise it with your employer's payroll department first. If they can't resolve it, contact HMRC directly. For a broader look at optimising your deductions, see our guide to increasing your take-home pay.