Most people look at one number on their payslip — the amount that hits their bank account — and ignore everything else. But every other line tells you something important about where your money is going and, crucially, where you might be able to keep more of it.
For a deeper look at how to reduce your deductions, see our National Insurance explained guide and our UK tax codes explained guide.
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The anatomy of a UK payslip
A typical UK payslip has three sections:
- Earnings — what you're paid before deductions
- Deductions — tax, NI, pension, and other amounts taken off
- Net pay — what you actually receive
Let's go through each line.
Earnings section
Gross pay
Your total earnings before any deductions. This includes:
- Basic salary
- Overtime
- Bonuses
- Commission
- Statutory sick pay (SSP) or maternity/paternity pay if applicable
Gross pay is the starting point for all tax calculations. If you're on salary sacrifice, your gross pay on the payslip will already be reduced — that's intentional.
Salary sacrifice deductions (if applicable)
If you're in a salary sacrifice scheme (pension, cycle to work, EV), these appear as a reduction to gross pay — not as a deduction below it. This is why salary sacrifice saves NI as well as tax.
Deductions section
PAYE Income Tax
The amount of income tax deducted under Pay As You Earn. This is calculated based on:
- Your tax code (e.g. 1257L means a £12,570 Personal Allowance)
- Your taxable income (gross pay minus Personal Allowance)
- The tax bands for the year
| Gross salary | £45,000 |
| Personal Allowance (1257L) | −£12,570 |
| Taxable income | £32,430 |
| Tax at 20% (up to £37,700) | £6,486 |
| Monthly PAYE deduction | £540.50 |
If your tax code is wrong, you could be paying too much or too little tax. Common issues: emergency tax code (1257L W1/M1), wrong code after changing jobs, or not claiming Marriage Allowance. Check yours at gov.uk/check-income-tax.
National Insurance (NI)
Employee NI contributions for 2024/25:
- 0% on earnings up to £12,570/year (£1,047.50/month)
- 8% on earnings between £12,570 and £50,270/year
- 2% on earnings above £50,270/year
NI is calculated on your post-sacrifice gross pay — which is why salary sacrifice saves NI as well as income tax.
Pension contributions
If you're in a workplace pension, your contribution appears here. There are two types:
| Type | How it appears | Tax saving |
|---|---|---|
| Salary sacrifice | Reduces gross pay (above the line) | Tax + NI |
| Net pay arrangement | Deduction below gross | Tax only |
| Relief at source | Deduction below gross | Tax only (HMRC adds 20%) |
If your pension shows as a deduction below gross pay rather than reducing gross pay, you may be missing out on NI savings. Ask HR if salary sacrifice is available.
Student loan repayments
Deducted automatically if you're on Plan 1, 2, 4, or 5 and earning above the threshold:
| Plan | 2024/25 threshold | Rate |
|---|---|---|
| Plan 1 | £24,990/year | 9% above threshold |
| Plan 2 | £27,295/year | 9% above threshold |
| Plan 4 (Scotland) | £31,395/year | 9% above threshold |
| Plan 5 (new) | £25,000/year | 9% above threshold |
| Postgraduate | £21,000/year | 6% above threshold |
Other deductions
You may also see:
- Child maintenance (if a deduction from earnings order is in place)
- Court orders
- Season ticket loans (employer loans repaid from salary)
- Cycle to Work / EV scheme payments (if not salary sacrifice)
Net pay
Your take-home pay after all deductions. This is what hits your bank account.
Year-to-date (YTD) figures
Most payslips show cumulative totals for the tax year (April to April). These are useful for:
- Checking you haven't overpaid tax
- Verifying your P60 at year end
- Spotting if an emergency tax code was applied mid-year
Common payslip problems
| Problem | What to do |
|---|---|
| Emergency tax code (W1/M1) | Contact HMRC or your employer's payroll team |
| Wrong tax code | Check via Personal Tax Account at gov.uk |
| NI deducted on pension | Pension may not be salary sacrifice — ask HR |
| Student loan deducted but loan repaid | Contact Student Loans Company |
| No pension deduction | Check auto-enrolment status with HR |
What this means for you
On a £45,000 salary, your payslip deducts around £540/month in income tax and £216/month in NI. If your pension is shown as a deduction below gross rather than reducing gross pay, you are missing the NI saving — worth around £16–40/month depending on your contribution level.
At £60,000, checking whether your pension is salary sacrifice or relief at source could be worth £100+/month in NI savings alone. Ask HR which method your scheme uses.
The payslip is also the fastest way to spot a wrong tax code. If your code is not 1257L (or a recognised variant), check it before the end of the tax year.
How to pay less tax — starting from your payslip
Once you understand your payslip, you can identify savings:
- Increase pension sacrifice — reduces gross pay, saves tax + NI
- Add Cycle to Work — saves 28–42% on a new bike
- EV salary sacrifice — drive a new EV at 2% BiK rate
- Check your tax code — wrong codes are common after job changes
- Claim Marriage Allowance — worth £252/year if your partner earns under £12,570
Try the TaxCal UK calculator to estimate your take-home pay.
FAQ
How do I know if my pension is salary sacrifice or relief at source?
If your pension contribution reduces your gross pay figure on the payslip, it is salary sacrifice. If it appears as a deduction below gross pay, it is relief at source or net pay arrangement.
Why is my tax code different from 1257L?
Common reasons: a benefit in kind (company car, private medical), underpaid tax from a previous year, Marriage Allowance, or an emergency code after a job change. Check your HMRC personal tax account for the reason.
What does W1 or M1 on my tax code mean?
It means you are on a non-cumulative emergency code — tax is calculated on each pay period in isolation rather than cumulatively. This often leads to overpaying tax. Contact HMRC to get it corrected.
Can I get a refund if I overpaid tax this year?
Yes. If you are on PAYE, HMRC usually issues a P800 at year end. You can also check and claim via your personal tax account at gov.uk.
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