Understanding your payslip

The information in this guide was last updated on 26/02/2014

No matter how you’re paid, every payday your employer should give you a payslip that shows:

  • Your earnings before tax. These are your gross earnings.
  • Deductions from your earnings; including income tax, student loan repayments, National Insurance contributions, pension contributions and so on.
  • Your earnings after these deductions. These are your net earnings.

Understanding income tax

Tax codes

Your payslip will also contain a tax code which is used by your employer to work out how much tax to deduct from your pay, so it’s important to have the right tax code .

In some cases, you might be on an ‘emergency’ tax code at first until HMRC has worked out how much tax you should be paying. You’ll be refunded any money that you overpay when your correct tax code is identified. 

Find out more about tax codes.

Tax bands

You are allowed to receive taxable income up to a certain amount without paying tax on it. This is called your Personal Allowance or tax-free allowance. 

If you’ve paid tax on taxable income under your personal allowance, you can reclaim it. Taxable income includes your earnings, as well as things like interest on savings.

You pay income tax on taxable income above your tax-free allowance. How much you pay is basically divided into three bands and rates:

  • Basic rate: tax is paid at 20% on taxable income. This is up to £32,010 for the tax year 2013-2014.
  • Higher rate: tax is paid at 40% on taxable income. This is from £32,011-£150,000 for the tax year 2013-2014.
  • Additional rate: tax is paid at 45% on taxable income over £150,000.

Understanding National Insurance

National Insurance is your contribution to certain state benefits, including the State Pension. How much you pay will affect your entitlement to these benefits. 

As an employee, or if you’re self-employed, you’ll pay National Insurance if your earnings are above a certain level. Your employer will also pay National Insurance contributions on your earnings.

You’ll have a National Insurance number that’s unique to you. You will have received this in a letter from HMRC when you were 16. 

Find out more about National Insurance numbers.

Understanding student loan repayments

If you took out a tuition fee or maintenance loan for higher education, you’ll start repaying it once your income reaches a certain level. Payments are taken out of your salary with your tax.

  • If your course started on or after September 1998, you’ll start paying back your loan once your income is £15,795 a year.
  • If your course started on or after 1 September 2012, you’ll start paying your loan back once your income is over £21,000 a year.

If you’re a part-time student you may be able to start repayments while you’re still studying. There’s no charge for paying some or all of your loan off early.