Money
Your payslip explained: tax code, NI and student loan
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A payslip packs a lot into a small space: codes, letters, “to date” columns and deductions that change from month to month. Most of it is simple once you know what each line is for, and checking it takes ten minutes. Mistakes do happen, usually with tax codes when you start a new job, and they’re much easier to fix early.
This guide goes through a payslip line by line using the 2026/27 tax year (6 April 2026 to 5 April 2027), works through an example, and ends with checks you can do yourself.
This guide explains how payslips work. It isn’t financial or tax advice. If something looks wrong, ask your employer’s payroll team or HMRC.
What a payslip has to show
If you’re an employee or worker, your employer must give you a payslip on or before payday. By law it must show (GOV.UK: payslips):
- your pay before and after deductions
- deductions that can change each payday, such as Income Tax and National Insurance
- fixed deductions, such as a season ticket loan, either on the payslip or in a separate statement given to you at least once a year
- the hours you worked, if your pay varies with the time you work
Most payslips show far more than that: your tax code, National Insurance number and category letter, the tax period, and running totals for the year. These are the parts worth understanding.
The top of the payslip
| Item | What it means |
|---|---|
| Tax period or tax month | Which period of the tax year this is. Month 1 runs from 6 April to 5 May, so a September payslip is usually month 6. Weekly pay uses weeks 1 to 52. |
| Tax code | Tells payroll how much you can earn tax-free. Covered in the next section. |
| NI number | Your National Insurance number. Check it’s yours: a wrong one means your contributions may not count towards your State Pension. |
| NI category letter | Usually A. Others include M (under 21), H (apprentice under 25), C (over State Pension age, so no employee National Insurance) and X (not liable, for example under 16). |
| Payment date and method | When the money reaches your account. |
Your tax code
The most common tax code for 2026/27 is 1257L. The number is your tax-free allowance with the last digit dropped, so 1257 means £12,570, the standard Personal Allowance. The letter says what kind of allowance it is. HMRC adjusts the number for things like company benefits or untaxed income, so yours may be different.
| Code or letter | What it means |
|---|---|
L | The standard tax-free Personal Allowance. |
M / N | Marriage Allowance: you’ve received (M) or transferred (N) 10% of a partner’s allowance. |
T | Your code includes other calculations to work out your allowance. |
K (e.g. K475) | You have income or benefits that aren’t taxed elsewhere and are worth more than your allowance. K475 adds £4,750 to your taxable pay. |
BR, D0, D1 | All pay from this job is taxed at the basic (20%), higher (40%) or additional (45%) rate, with no allowance. Common on a second job, because your allowance is used by the first. |
0T | No tax-free allowance, often because your new employer has no details from you yet. |
NT | No tax is taken from this income. |
S or C at the start | You’re taxed at Scottish (S) or Welsh (C) rates. Welsh rates are currently the same as England’s. |
W1, M1 or X at the end | An emergency code. Tax is worked out on each week’s or month’s pay on its own, ignoring what you earned earlier in the year. |
An emergency code usually appears in a new job before your employer has your P45 or HMRC has sent your proper code. It can mean paying too much or too little tax for a while. It normally corrects itself within a month or two, and any overpaid tax comes back through later payslips.
To see the tax code HMRC has given you and why, sign in to the HMRC app or your personal tax account on GOV.UK. If it’s wrong, for example because a benefit has ended or HMRC thinks you still have an old job, update it there. Your employer can only change your code when HMRC tells them to.
Income Tax in 2026/27
Income Tax is charged on pay above your allowance. These are the bands for a standard 1257L code, from HMRC’s rates and thresholds for 2026 to 2027.
England, Wales and Northern Ireland
| Band | Yearly pay | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
Scotland
| Band | Yearly pay | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Starter rate | £12,571 to £16,537 | 19% |
| Basic rate | £16,538 to £29,526 | 20% |
| Intermediate rate | £29,527 to £43,662 | 21% |
| Higher rate | £43,663 to £75,000 | 42% |
| Advanced rate | £75,001 to £125,140 | 45% |
| Top rate | Over £125,140 | 48% |
Above £100,000, your Personal Allowance shrinks by £1 for every £2 of income, and it’s gone completely at £125,140. Payroll uses your code to spread the allowance across the year: on a monthly payslip with 1257L, roughly £1,048 of each month’s pay is tax-free.
National Insurance
Employees pay Class 1 National Insurance, worked out on each pay period on its own (unlike Income Tax, it doesn’t look at the year so far). For category A in 2026/27:
- 0% on earnings up to £242 a week or £1,048 a month (£12,570 a year)
- 8% on earnings from there up to £967 a week or £4,189 a month (£50,270 a year)
- 2% on earnings above that
Because each period stands alone, a month with overtime or a bonus can mean more National Insurance that month, and it isn’t evened out later.
Student loan and pension
Student loan repayments are taken through payroll once your pay is over your plan’s threshold. You repay 9% of pay above the threshold for Plans 1, 2, 4 and 5, plus 6% above the threshold for a Postgraduate Loan if you have one too.
| Plan | Yearly threshold 2026/27 | Monthly | Rate |
|---|---|---|---|
| Plan 1 | £26,900 | £2,241.66 | 9% |
| Plan 2 | £29,385 | £2,448.75 | 9% |
| Plan 4 (Scotland) | £33,795 | £2,816.25 | 9% |
| Plan 5 | £25,000 | £2,083.33 | 9% |
| Postgraduate Loan | £21,000 | £1,750.00 | 6% |
Like National Insurance, repayments are worked out per pay period, so a bonus month can trigger a repayment even if your yearly pay is under the threshold. If that happens, you can ask the Student Loans Company for the money back after the tax year ends.
Pension contributions appear in one of three ways, and it changes where they sit on the payslip:
- Net pay arrangement: taken before tax is worked out, so you get tax relief straight away. National Insurance is still charged on the full amount.
- Relief at source: taken after tax. The pension provider then claims basic-rate tax relief from HMRC and adds it to your pot, so the deduction looks smaller than your contribution.
- Salary sacrifice: your gross pay is lower to begin with and your employer pays the difference into your pension. You pay less tax and less National Insurance.
Workplace pensions are often worked out on “qualifying earnings”, a band of your pay rather than all of it, so a 5% contribution may be less than 5% of your full salary.
A worked example
Someone in England earns £36,000 a year, paid monthly, with tax code 1257L, NI category A, a Plan 2 student loan and no pension deductions on the payslip (to keep it simple):
| Line and working (yearly) | Year | Month |
|---|---|---|
| Gross pay | £36,000.00 | £3,000.00 |
| Income Tax (£36,000 − £12,570) × 20% | £4,686.00 | £390.50 |
| National Insurance (£36,000 − £12,570) × 8% | £1,874.40 | £156.20 |
| Student loan (Plan 2) (£36,000 − £29,385) × 9% | £595.35 | £49.61 |
| Take-home pay | £28,844.25 | £2,403.69 |
The real payslip will be within a few pence of this, because payroll works each line out per pay period with its own rounding. Student loan deductions, for example, are rounded down to whole pounds, so this person would see £49 rather than £49.61.
You can get the same breakdown for your own pay, including Scottish tax, pension type and student loan plans, with the take-home pay calculator.
How to check your payslip
- Gross pay. Check hours, overtime, holiday pay and any bonus against what you expected. This is where most real errors are.
- Tax code. Compare it with the code in the HMRC app or your personal tax account. If you see an emergency code (W1, M1 or X) for more than a couple of months, ask payroll whether they’ve had your P45 or a code from HMRC.
- The deductions. Put your gross pay, region, pension and student loan details into the take-home pay calculator. If its monthly figures are within a pound or two of your payslip, the deductions are right. A big gap usually points to the tax code, a one-off payment or a pension set up differently from what you thought.
- Year-to-date totals. These should keep adding up from month 1. At the end of the tax year they should match your P60, which your employer must give you by 31 May.
- Your NI number and category letter. Both should be right and should stay the same unless your circumstances change, such as turning 21 or reaching State Pension age.
Keep your payslips and P60s. You’ll need them for mortgage and rental applications, to check your State Pension record, and to claim back overpaid tax.
Quick checklist
- Payslip received on or before payday
- Gross pay matches your hours, overtime and holiday
- Tax code matches the HMRC app, with no lasting emergency code
- NI number and category letter are correct
- Deductions match the take-home pay calculator to within a pound or two
- Year-to-date totals add up and match your P60 at the end of the year
Estimates for illustration only and not financial advice. Rates and thresholds are for the 2026/27 tax year and change every April.