What is gross pay?
Gross pay is everything you earned in the pay period before anything is taken off. It is your salary or wages plus any extras like overtime or bonus.
In the example: a £30,000 salary is £2,500.00 a month, plus £200.00 overtime, so gross pay is £2,700.00.
What can be added to my pay?
Anything extra your employer pays you on top of basic pay. The usual ones:
- Overtime: hours over your normal hours, sometimes at a higher rate.
- Bonus or commission: extra pay for results. It is taxed like normal pay.
- Holiday pay: your normal pay while on holiday. Most people working 5 days a week get at least 28 days of paid leave a year, which can include bank holidays.
- Statutory Sick Pay (SSP): £123.25 a week, or 80% of your normal weekly earnings if that is lower, for up to 28 weeks. Many employers pay more.
- Maternity, paternity or shared parental pay: paid through payroll while you are on leave.
- Back pay: money owed from an earlier period, such as a pay rise paid late.
- Expenses paid back: money you spent for work, like travel to a client. These are usually not taxed, because they are not earnings.
In the example: 10 hours of overtime at £20 an hour adds £200.00.
What comes off before tax?
Some deductions are taken before income tax is worked out, so you pay less tax:
- Pension (net pay): your workplace pension contribution is taken first, so you get tax relief straight away.
- Salary sacrifice: you agree to a lower salary in return for a benefit, like a pension payment or a bike. It saves income tax and National Insurance. It often shows as a lower gross pay.
- Payroll giving: gifts to charity taken before tax.
In the example: 5% of basic pay goes to the pension, £125.00. Tax is worked out on £2,575.00, not £2,700.00. National Insurance is still worked out on the full £2,700.00.
How is income tax worked out?
Income tax is taken through PAYE (Pay As You Earn). Your tax code tells your employer how much you can earn tax-free. The usual code is 1257L: £12,570 a year tax-free, about £1,047.50 a month.
After that, pay is taxed at 20%, then 40% on yearly pay above £50,270 and 45% above £125,140.
In the example: £2,575.00 minus the £1,047.50 tax-free amount leaves £1,527.50. 20% of that is £305.50.
Not sure about your code? Check what your tax code means.
What is National Insurance?
National Insurance (NI) is a separate deduction that builds your right to the State Pension and some benefits. Employees pay 8% on monthly pay between £1,047.50 and £4,189.17, and 2% above that. Your NI number makes sure your contributions are recorded against your name. Most employees have NI letter A.
In the example: £2,700.00 minus £1,047.50 is £1,652.50. 8% of that is £132.20.
What is employer National Insurance?
Your employer pays its own National Insurance on top of your pay: 15% of what you earn above £5,000 a year. It does not come out of your pay, but it is part of what you cost your employer, so some payslips show it for information.
In the example: about £342.50 this month. With the 3% employer pension, you cost Example Ltd £3,117.50 this month.
How do student loan repayments work?
You repay 9% of what you earn above your plan's threshold, taken through payroll. The thresholds for 2026/27 are £26,900 (Plan 1), £29,385 (Plan 2), £33,795 (Plan 4) and £25,000 (Plan 5) a year. Postgraduate loans are 6% above £21,000. Payroll rounds the amount down to whole pounds.
In the example (Plan 2): £2,700.00 minus £2,448.75 is £251.25. 9% is £22.61, rounded down to £22.00.
What comes off after tax?
Some deductions come out of your pay after tax and do not reduce it: union fees, a season ticket loan, a work social club, or repaying an earlier overpayment. A court can also order an employer to take money for a debt (an attachment of earnings order).
In the example: union fees of £12.00.
What is net pay?
Net pay, or take-home pay, is what reaches your bank account: gross pay minus all deductions.
In the example: £2,700.00 minus £596.70 deductions = £2,103.30.
What do year to date and tax period mean?
The tax year runs from 6 April to 5 April. The tax period is how far through the year you are: month 1 is April, month 6 is September. Year to date figures add up everything since 6 April.
PAYE looks at the year to date, not just one month. That is why tax can be lower after a low-paid month, or higher after a bonus, and why a new job can mean a different tax bill for the first month or two.
In the example: after 6 equal months, gross pay to date is £16,200.00 and tax to date is £1,833.00.
What are a P60, P45 and P11D?
- P60: a summary of your pay and tax for the whole tax year, from the employer you work for on 5 April. You get it by 31 May.
- P45: given to you when you leave a job. Give it to your next employer so they use the right tax code.
- P11D: lists taxable benefits such as a company car or health insurance, if you get any.
Keep them. You may need them to claim a tax refund, apply for a mortgage or check your State Pension record.
How do I check my payslip is right?
Check your name, NI number and tax code first. Then check that the tax, National Insurance and student loan match what you should pay. Mistakes happen most often in the first months of a new job, after a pay rise or with an emergency tax code (W1, M1 or X).