How to Read Your Payslip Like a Pro

A payslip is a legal document your employer must give you each time you’re paid—whether weekly, fortnightly, or monthly. It shows:

• Your gross pay (before any deductions)
• Your net pay (take-home pay)    
• All taxes and deductions applied
• Any bonuses, overtime, or commission
• Your National Insurance number and tax code

According to GOV.UK all employees must receive a payslip on or before payday, either digitally or on paper.

If you manage staff, ensuring accurate and compliant payslips is part of your legal duty. Loyals’ Payroll & Payslips Service elps employers stay HMRC-compliant while employees get clear, correct payslips every time.

Many people glance at their payslip, see the final amount, and move on. But checking the details can reveal issues like:

• Over- or under-deduction of tax
• Incorrect overtime or holiday pay
• Missing pension or benefit contributions
• Wrong National Insurance category

Spotting discrepancies early prevents financial stress later. Payslips also serve as proof of income when applying for loans, mortgages, or rentals.

Let’s break down what you’ll typically see on a UK payslip.

1. Personal Details

This includes your name, employee number, National Insurance (NI) number, and possibly your department or job title. Check that your NI number is correct—it links directly to your tax and pension records.

2. Tax Code

Your tax code determines how much Income Tax is deducted. It’s based on your personal allowance (how much you can earn before paying tax) and any adjustments from HMRC.

A standard tax code for most people in 2025/26 is 1257L, meaning you can earn £12,570 before tax.

If you see codes like BR, D0, or K, something may be off. Refer to HMRC’s Tax Code Checker or speak to your accountant to confirm.

3. Gross Pay

Gross pay is the total you earned before any deductions. It includes:

• Basic salary or hourly wages
• Overtime
• Bonuses and commission
• Statutory payments (e.g., sick pay, maternity pay)

4. Deductions

This is where most people’s eyes glaze over—but it’s crucial. Deductions fall into two main types: statutory (required by law) and voluntary (agreed with your employer).

Statutory Deductions

• Income Tax – based on your tax code and earnings.
• National Insurance (NI) – contributes toward state benefits and pension.
• Student Loan Repayments – Plan 1, 2 or 4 depending on your loan type.
• Pension Contributions – auto-enrolled workplace schemes under the Pensions Act 2008

Voluntary Deductions

• Private health insurance
• Cycle-to-work schemes
• Charitable donations (Gift Aid)
• Season ticket loan repayments

Each deduction should be itemised clearly. If a deduction seems unfamiliar, ask your payroll department for a breakdown.

5. Employer Contributions

Employers also contribute on your behalf—though these amounts may not appear on your payslip. They include their share of National Insurance, pension contributions, and possibly benefits-in-kind.

Knowing what your employer contributes helps you understand the true value of your remuneration package.

6. Net Pay

This is your take-home pay—the money actually landing in your account. It’s calculated as:

Gross Pay – Deductions = Net Pay

If your net pay seems lower than expected, compare against previous payslips and confirm whether bonuses or one-off deductions (like student loans or unpaid leave) apply. 

7. Year-to-Date (YTD) Totals

Payslips often show cumulative figures for the current tax year: total earnings, total tax paid, and total NI contributions. These are helpful for checking consistency and preparing your Self-Assessment Tax Return if you have multiple income sources.

8. Employer and Payment Details

Finally, you’ll see your employer’s PAYE reference, payroll ID, pay date, and payment method. Ensure your bank details are correct—an error here delays your wages.

Even reputable employers make mistakes. Look out for:

• Incorrect tax code – leads to under- or over-taxation.
• Wrong NI category – may reduce benefits or overcharge NI.
• Unrecorded overtime or bonuses – check gross pay matches expectations.
• Duplicate deductions – especially pensions or student loans.
• Missing statutory pay – like SSP (Sick Pay) or SMP (Maternity Pay).

If something looks off, compare with prior payslips and your HMRC Personal Tax Account.

You can also ask payroll for an itemised correction or contact HMRC directly.

For employers, accurate payslips aren’t just an admin task—they’re a legal obligation.

HMRC and ACAS can impose penalties for late, missing, or incorrect payslips. Errors can also damage staff trust and retention.

At Loyals, we handle payroll processing, PAYE submissions, and payslip generation, ensuring every detail is right—from tax codes to pension enrolment.

Most UK businesses now issue digital payslips, saving time and paper. Under Making Tax Digital (MTD), payroll software must integrate directly with HMRC systems.

This ensures real-time reporting of PAYE and NI contributions. It also means errors are caught sooner, and employees get immediate access to updated payslips online.

If your employer still uses manual payroll, it may be time to modernise. Explore MTD-ready payroll options with Loyals’ Business Compliance Services.

Let’s look at a simplified example.

Check that the net pay matches your bank deposit. Small discrepancies might indicate rounding differences; larger ones require clarification.

Bonuses, commissions, and overtime are usually taxed in the same way as regular pay. They increase your gross income for that period, which can push you temporarily into a higher tax band.

If you notice unusually high deductions in a month where you received a bonus, it’s often because PAYE calculates tax cumulatively. The overpaid portion usually balances out later in the year.

For personalised payroll advice, including bonus planning and tax optimisation, talk to Loyals’ Payroll Specialists.

By law, you have the right to:

• Receive a payslip on or before payday.
• See itemised deductions.
• Request corrections if an error occurs.
• Access older payslips upon request.

Employers who fail to issue payslips may face action through ACAS or the employment tribunal system.

For businesses, ensuring payroll transparency protects both compliance and culture.

Always keep payslips for at least six years. They may be required for:

• Mortgage applications
• Pension calculations
• Tax disputes
• Proof of employment

Digital storage is acceptable as long as records remain legible and accessible.