Many people only glance at their net pay, but a payslip contains crucial details about how your income is taxed and where your money goes. By understanding each section, you can check for errors, avoid overpayments, and budget more effectively.

1. Income Tax and National Insurance (NI)

For the 2025/26 tax year, the Personal Allowance is £12,570.

• Income above this is taxed at 20% (basic rate), 40% (higher rate), or 45% (additional rate).
• National Insurance (Class 1) is 8% on earnings between £12,570–£50,270 and 2% above that.

Always check your tax code is correct. An incorrect code could mean you’re overpaying or underpaying HMRC.

2. Pension Contributions

Under the UK’s auto-enrolment scheme, most employees aged 22 or over and earning more than £10,000 a year are automatically enrolled in a workplace pension.

• The minimum contribution is 8% of qualifying earnings (at least 3% from your employer).
• You can increase your contributions to save more for retirement.

Checking your pension deductions ensures both you and your employer are paying the correct percentage.

3. Student Loan Repayments

Repayments begin once your income passes your plan’s threshold:

• Plan 1: £24,990
• Plan 2: £27,295
• Plan 4 (Scotland): £31,395
• Postgraduate Loan: £21,000

You repay 9% of earnings above the threshold (or 6% for postgraduate loans). Always check which plan you’re on so you’re not overcharged.

4. Other Deductions

Depending on your workplace, you may see additional deductions, such as:

• Cycle-to-work schemes
• Union fees
• Childcare vouchers (older schemes still in use)

These should only appear if you’ve signed up for them, so it’s important to confirm they match your agreements.

Final Thoughts

Understanding your payslip isn’t just about checking your pay is correct — it also helps keep your tax and NI records accurate with HMRC, ensures your pension savings are on track, and makes budgeting easier. Taking five minutes each month to review your payslip can save you money and prevent future financial headaches.