Kael Tripton Ltd
UK Payslip Explained Line by Line
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TL;DR
A UK payslip lists every deduction from gross pay to net pay. This guide walks through each common line: PAYE, NI, pension, student loan, salary sacrifice. Statutory requirements under section 8 Employment Rights Act 1996.
Key facts
- Section 8 ERA 1996 requires itemised payslip.
- Required: gross pay, deductions, amounts, net pay.
- Variable deductions need explanation.
- Tax code displayed alongside PAYE figure.
- NI category letter shown.
- Year-to-date columns standard.
- Workers gained payslip rights from April 2019.
- Online and printed payslips both acceptable.
A UK payslip shows the path from gross pay to net pay. Section 8 of the Employment Rights Act 1996 requires every employee (and from April 2019 every worker) to receive an itemised payslip at or before the time of payment. The payslip must show gross pay, the amount and reason for each deduction, the net pay, and the method of payment.
This guide walks through each common payslip line, what it means, where the calculation comes from, and what to query if something looks wrong.
Gross pay and the headline figure
Gross pay is the headline amount before deductions. For most salaried employees this is the monthly equivalent of the annual salary (annual / 12). For hourly or shift workers it is the hours worked times the rate, plus any overtime premium.
Some payslips show a single gross pay line; others show a breakdown (basic salary, overtime, bonus, commission, allowances). The breakdown is useful for confirming the calculation. Where overtime or bonus is paid, the rate and hours should be visible.
Pre-tax adjustments (salary sacrifice into pension, cycle-to-work scheme, EV lease) reduce the gross pay before tax calculation. Some payslips show salary sacrifice as a separate line; others show only the post-sacrifice gross. The distinction matters for things like mortgage applications (lenders often use gross before sacrifice).
Worked example: an employee on GBP 36,000 salary with 5% pension salary sacrifice. Headline gross GBP 3,000/month. Sacrifice GBP 150/month. Post-sacrifice gross for tax purposes GBP 2,850. Some payslips show: 'gross pay GBP 3,000, sacrifice -GBP 150, taxable pay GBP 2,850'. Others show: 'gross pay GBP 2,850' with the sacrifice handled invisibly.
PAYE income tax line
The income tax line shows the deduction for the pay period under the cumulative PAYE method. The tax code (e.g. 1257L) appears nearby. Year-to-date tax in the cumulative column.
For a 1257L cumulative code, each pay run calculates year-to-date allowance and band capacity, compares to year-to-date taxable pay, and deducts the amount to bring the year-to-date deduction to the correct level. The mechanism produces small variations month-to-month for fluctuating pay but the correct annual total.
An emergency code (1257L M1 or W1) applies the allowance to each pay period independently. This typically over-taxes early months and under-taxes later, with the imbalance corrected once a cumulative code is issued.
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Common queries: tax higher than expected (check the tax code; emergency codes are common reasons), unexpected change in tax (check the coding notice via PTA; HMRC may have updated based on new information about other income or benefits).
NI category and rate
NI is shown as a separate line with the category letter applied. Category A is the standard letter (employee under State Pension Age, no special status). Other categories: H (apprentice under 25), M (employee under 21), C (over State Pension Age, zero employee NI), J/Z (deferment for multiple employments).
NI calculation: 8% on monthly earnings between GBP 1,048 (Primary Threshold) and GBP 4,189 (Upper Earnings Limit). 2% on earnings above UEL. NI is non-cumulative; each month stands alone for calculation.
The category determines the rates. Category A employees pay the standard 8% and 2%. Category C employees pay zero employee NI. Category H and M employees pay standard employee NI but their employer pays no secondary NI up to UEL.
Worked example: a Category A employee on GBP 3,000 monthly pay. NI calculation: GBP 3,000 - GBP 1,048 = GBP 1,952 at 8% = GBP 156/month NI deduction. Annual NI around GBP 1,874.
Pension, student loan, and other deductions
Pension contributions show as a deduction line with the scheme name. Net pay arrangement schemes deduct gross from pay before tax (the employee gets full marginal-rate relief immediately). Relief-at-source schemes deduct net from pay; the provider claims basic-rate relief and adds it to the contribution.
Student loan deductions show with the plan letter (1, 2, 4, 5) and amount. Plan 1 (pre-2012 starters): 9% above GBP 26,065/year. Plan 2 (post-2012 England/Wales): 9% above GBP 28,470. Plan 4 (Scotland): 9% above GBP 32,745. Plan 5 (post-Aug 2023 England): 9% above GBP 25,000. Postgraduate loan: 6% above GBP 21,000.
Other deductions: court orders (Attachment of Earnings Orders, Council Tax Attachment), childcare voucher scheme (legacy, closed to new entrants from 2018), private health insurance employee contribution where employer-provided, gym membership or other benefit-in-kind. Each appears on a separate line with a reference or description.
Practical action: each deduction line should be identifiable. Unidentified deductions warrant query to payroll. Unauthorised deductions are prohibited under section 13 ERA 1996 and can be challenged at employment tribunal within 3 months less one day of the deduction.
Year-to-date and net pay
Year-to-date columns show cumulative totals for gross, tax, NI, pension, and net pay since the start of the tax year on 6 April. The March (month 12) payslip year-to-date totals should match the annual figures that will appear on the P60 issued by 31 May.
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Checking year-to-date tax against an annualised calculation (expected gross income tax for the year times months elapsed over 12) catches PAYE errors before year-end. Where the year-to-date tax is materially higher than the annualised position, an emergency code may still be in force.
Net pay is the gross less all deductions, paid to the employee's bank account by the employer's standard pay date. Most employers pay monthly (the 28th or last working day common). Some pay weekly or fortnightly for hourly workers.
Practical action: keeping payslips for at least 6 years (matching HMRC's standard enquiry window) provides the audit trail. Digital payslips are acceptable; saving them to a personal location independently of the employer's portal is sensible because portal access typically ends when the employment ends.
Year-end P60 and reconciliation
By 31 May following each tax year the employer issues a P60 to every employee in continuous employment at 5 April. The P60 shows total pay, total tax, NI contributions, statutory payments (SSP, SMP), student loan deductions, and tax code at year end.
Checking the P60 against the March payslip year-to-date totals confirms reconciliation. The figures should match exactly; differences typically reflect timing of submissions or RTI updates. Where the P60 differs from expected figures, querying with payroll resolves before HMRC's year-end reconciliation produces a P800 calculation.
The P60 is required evidence for mortgage applications (typically the latest 1-2 P60s plus payslips), immigration applications, Self-Assessment cross-checks where applicable, and tax credit/Universal Credit renewals. Saving each year's P60 in a personal location preserves the record.
Practical action: P60s should be retained for at least 6 years (matching HMRC's standard enquiry window). Digital copies are acceptable provided they meet HMRC's tamper-evident format requirements. Most modern payroll systems issue PDF P60s that can be downloaded and saved.
Common payroll errors and how to challenge
Common payroll errors: wrong tax code applied, NI category letter incorrect for age, pension contribution at wrong rate, salary sacrifice arrangement not reflected, student loan plan misclassified, holiday pay miscalculated for irregular workers.
First step: query through internal payroll. Most employers have a payroll helpdesk that can identify and correct errors. The correction typically applies retroactively to the next pay run, with any over-deduction refunded or under-deduction collected over time.
Where the employer disputes the correction or is uncooperative, the route is the section 13 ERA 1996 unauthorised deductions claim at employment tribunal
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