How to Read Your Salary Slip: Understanding Take-Home Pay in 2026/27

How to Read Your Salary Slip: Understanding Take-Home Pay in 2026/27

Your salary slip (or payslip) is the document that shows exactly what you earned and what was deducted before the money reached your bank account. UK law requires payslips to show gross pay, each deduction separately, and net pay. Since April 2019, employers must also show hours worked for employees paid by the hour. Understanding each line helps you check that your take-home pay is correct and that your employer and HMRC are applying the right rates.

Gross Pay vs Net Pay

Gross pay is your total earnings before any deductions – your salary, overtime, bonuses, and any other payments. Net pay (or take-home pay) is what actually lands in your bank account after all deductions. The difference between the two is made up of statutory deductions (Income Tax, National Insurance, student loan repayments) and voluntary deductions (pension contributions, salary sacrifice schemes, benefits deductions).

Income Tax (PAYE)

Income Tax is calculated using your tax code and the current bands. For 2026/27, the personal allowance is £12,570 – you pay no tax on this amount. Above that:

• Basic rate (20%) on earnings from £12,571 to £50,270
• Higher rate (40%) on earnings from £50,271 to £125,140
• Additional rate (45%) on earnings above £125,140

Your tax code is the most important number on your salary slip for Income Tax. The standard code is 1257L, which means £12,570 tax-free. If your code is different, HMRC may be adjusting for benefits in kind, underpaid tax from a previous year, or a marriage allowance transfer.

Scottish taxpayers use different bands set by the Scottish Parliament. Scotland has five Income Tax bands (starter, basic, intermediate, higher, top) with rates ranging from 19% to 48%. This means the same gross salary can produce a different take-home north of the border. Always check your tax code – if you live in Scotland it will start with an S (e.g., S1257L).

National Insurance (NI)

Employee National Insurance is calculated separately from Income Tax, using its own thresholds. For 2026/27:

• 8% on weekly earnings between £242 and £967 (equivalent to £12,570–£50,270 annually)
• 2% on weekly earnings above £967 (above £50,270)
• No NI on earnings below the primary threshold (£242/week)

NI is worked out on each pay period individually, not on the year as a whole. Your salary slip will show the NI deduction as a separate line, often labelled 'NI' or 'NICs'. Unlike Income Tax, NI stops when you reach State Pension age.

Student Loan Repayments

If you have a student loan, your employer will deduct repayments through PAYE. The plan type matters:

• Plan 1: 9% of earnings above £26,900/year
• Plan 2: 9% above £29,385/year
• Plan 4 (Scotland): 9% above £33,795/year
• Plan 5: 9% above £25,000/year
• Postgraduate Loan: 6% above £21,000/year

Check your salary slip to confirm which plan is being used. If you have both an undergraduate and postgraduate loan, only one plan can be applied at a time in most payroll systems.

Pension Contributions

Pension contributions can appear on your salary slip in two main ways:

• Salary sacrifice: The contribution reduces your gross pay before Income Tax and NI are calculated. You save tax and NI on the amount sacrificed.
• Relief at source: The contribution is taken from your net pay, and the pension provider claims basic rate tax relief from HMRC.

Your salary slip should show the pension deduction clearly. If you are in a salary sacrifice scheme, you may see a lower gross pay figure for tax purposes.

How to Check Your Salary Slip

1. Confirm your tax code matches the standard 1257L or the code you have from HMRC.
2. Check the region – if you live in Scotland, your tax code should start with S.
3. Verify your student loan plan matches your actual loan type.
4. Check your pension type – is it salary sacrifice or relief at source? Does the deduction match your chosen percentage?
5. Look at the pay period – partial months or bonuses can cause variations.
6. Review year-to-date (YTD) figures – cumulative totals from 6 April should align with your expected earnings and deductions.

If your salary slip doesn't match an online estimate, work through these steps. Online calculators, like our take-home calculator, assume a standard 1257L code, no pension, and no student loan. Real payslips vary with your exact circumstances.

Take-Home Pay Examples

For a typical employee on £35,000 with standard 1257L code, no pension, and no student loan:

• Income Tax: £4,486/year
• National Insurance: £1,794/year
• Take-home pay: £28,720/year (£2,393/month)

At the National Living Wage (£12.71/hour for 21+, 37.5 hours/week):

• Gross annual: ~£24,785
• Take-home: ~£1,780/month (after tax and NI)

These figures are estimates. Your actual take-home depends on your tax code, pension, student loan, and whether you are a Scottish taxpayer. For a full breakdown of different salaries, see our salary articles.

Why Understanding Your Salary Slip Matters

Your salary slip is your record of earnings and deductions. Mistakes can happen – wrong tax codes, incorrect NI categories, or missed student loan repayments. By knowing what each line means, you can spot errors and contact HMRC or your payroll department to correct them. It also helps you plan your finances, understand the true cost of salary sacrifice benefits, and see the impact of a pay rise or bonus.

For more detailed guidance on UK tax rates, National Insurance, and take-home pay calculations, explore our topics page. Always refer to official GOV.UK guidance for the most authoritative information.