Start with gross pay
Your gross pay is your salary before anything is taken off. If you are paid hourly, it is your hourly rate multiplied by the hours you are paid for. Bonuses, overtime and commission are usually added to gross pay in the period they are paid.
Income Tax
Most people have a tax-free Personal Allowance of £12,570. Income above that is taxed in bands. In England, Wales and Northern Ireland the next £37,700 is taxed at 20%, income up to £125,140 at 40%, and anything above at 45%.
Scotland sets its own bands, with six rates from 19% to 48%. Where you live, not where you work, decides which bands apply.
If your adjusted net income is over £100,000, your Personal Allowance is reduced by £1 for every £2 above that level, until it reaches zero at £125,140.
National Insurance
Employee National Insurance is calculated separately from Income Tax. For 2025/26 most employees pay 8% on earnings between £12,570 and £50,270 a year, and 2% on earnings above that. It is worked out on each pay period, so irregular pay can change the amount.
Pension and student loans
Workplace pension contributions may be taken before or after tax, depending on your scheme. Student loan repayments are 9% of earnings above your plan's threshold (6% for Postgraduate Loans).
Why your payslip may differ
Payroll uses your tax code and works cumulatively through the year, so an emergency tax code, a benefit in kind or a mid-year pay change can make a payslip differ from an annual estimate.
Figures refer to the 2025/26 tax year. General information only, not financial advice.
