UK Payslip Deductions: Every Line Explained

A UK payslip is the contract-mandated document showing how gross pay becomes net pay. Under section 8 of the Employment Rights Act 1996, every employee (and from April 2019 every worker) is entitled to an itemised payslip for each pay period. The payslip must show gross pay, the amount and reason for every deduction, the net pay, and the method of payment.

This guide walks through each common payslip line, what it means, where the calculation comes from, and what to do if a line looks wrong. The focus is the standard UK payslip; specific employers add lines for sector-specific allowances and benefits.

Gross pay, taxable pay and the sacrifice gap

Gross pay is the headline amount before any deductions. Taxable pay is gross pay less any pre-tax adjustments: salary sacrifice into pension, cycle-to-work scheme, electric vehicle lease, and any other arrangement that reduces pay subject to PAYE.

Some payslips show gross pay and taxable pay as separate lines; some show only post-sacrifice gross. The distinction matters when applying for credit (lenders typically use gross), calculating statutory pay (often based on pre-sacrifice qualifying weeks), or assessing pension qualifying earnings.

Worked example: an employee on GBP 60,000 sacrifices GBP 6,000 to pension. Headline salary GBP 60,000; reduced gross for PAYE GBP 54,000; payslip might show 'gross pay GBP 60,000', 'pension sacrifice -GBP 6,000', 'taxable pay GBP 54,000'. Income tax and NI are calculated on GBP 54,000.

Practical action: where mortgage affordability or maternity pay matters, confirming with the employer which figure is reported to lenders or used for statutory calculations is worth doing before agreeing the sacrifice. Some employers will supply an annual letter confirming headline salary notwithstanding the sacrifice.

PAYE income tax line

The income tax line on the payslip shows the tax deducted for the pay period under the cumulative PAYE method. The tax code (e.g. 1257L) appears nearby. Year-to-date tax is shown in the cumulative column.

A pay period that produces a refund line (negative tax) is normal where year-to-date pay drops below cumulative allowance, or where a tax code change increases the allowance retroactively. The refund is built into net pay rather than appearing as a separate payment.

Worked example: an employee on cumulative 1257L receives a tax code update from 1257L to 1357L (additional GBP 1,000 of allowance) effective month 8. The month 8 calculation now applies GBP 904 of allowance per month (1/12 of GBP 13,570 less the previous GBP 1,047) retroactively for months 1 to 8 plus month 8's allocation. The month 8 payslip shows a small tax refund line offsetting that month's tax due.

Where the tax line looks materially wrong, the PTA is the fastest route to investigate. Common causes of incorrect tax: wrong tax code, missed P11D adjustment, second job allowance not allocated correctly, recent address change not yet reflected in regional taxpayer status (S, C, none).

National Insurance line and the category letter

National Insurance is shown as a separate line with the category letter applied. The standard letter is A (employee under State Pension Age, no reduced contribution). Other letters: H (apprentice under 25), M (employee under 21), B (married woman with reduced rate election, historical only), C (employee over State Pension Age, no employee NI but employer still pays).

The NI calculation uses the category letter to set the rates and thresholds. For category A in 2026/27: 8% between Primary Threshold (GBP 1,048 a month) and Upper Earnings Limit (GBP 4,189 a month), 2% above. NI is non-cumulative: each month stands alone.

Worked example: an employee turning 66 (State Pension Age) in October moves from category A to category C from the following pay period. The November payslip shows NI on October earnings as category A (full 8%) and any earnings after the birthday as category C (zero employee NI). The employer continues to pay secondary Class 1 at 13.8% regardless.

Edge case: directors of companies use the annual NI basis rather than monthly. NI is calculated cumulatively each pay period against year-to-date pay and the annual threshold. This produces a different pattern from regular employees, with directors often paying no NI in early months and a large deduction later in the year as the threshold is reached.

Pension, student loan and statutory deductions

Pension contributions show as a deduction line with the scheme name and amount. Where the scheme is net pay arrangement, the deduction is pre-tax. Where it is relief-at-source, the deduction is post-tax with the provider adding 25% basic-rate uplift via HMRC claim.

Student loan deductions show with the plan letter (1, 2, 4, 5) and the amount. Postgraduate loan is a separate line. Each is calculated as 9% (or 6% for PGL) of pay above the relevant monthly threshold for that period only - non-cumulative, without reconciliation through the year.

Statutory deductions include court orders (Attachment of Earnings Orders), Council Tax Attachment of Earnings, Child Support deductions through the DEO regime. These have a statutory priority order under the Attachment of Earnings Act 1971 and overflow rules where multiple orders apply. They appear with a reference number on the payslip.

Worked example: a GBP 40,000 employee with a Plan 2 student loan and a Council Tax Attachment of Earnings for GBP 1,200. Monthly pay GBP 3,333. Tax: GBP 286 (year-to-date adjusted). NI: GBP 183. Pension 5%: GBP 167. Plan 2: 9% of (GBP 3,333 - GBP 2,373) = GBP 86. CTAEO at the appropriate band rate for GBP 40,000 income: approximately GBP 80 a month under Schedule 4 of the Council Tax (Administration and Enforcement) Regulations 1992. Total deductions GBP 802; net pay GBP 2,531.

Year-to-date columns and the period-end check

The cumulative columns on a payslip show year-to-date totals for gross, tax, NI, pension and net pay. A March (month 12) payslip year-to-date totals should match the annual figures that will appear on the P60 issued by 31 May.

Checking the year-to-date tax against an annualised calculation (gross income tax expected for the year, multiplied by months elapsed over 12) catches PAYE errors before year-end. Where the year-to-date tax is materially higher than the annualised position, an emergency code may still be in force or a benefit deduction has been over-applied.

Where the year-to-date NI looks wrong, the most common cause is a category letter error following a birthday transition (age 21, age 25 for apprentice, State Pension Age). The employer can correct retroactively with HMRC by adjusting the next RTI submission.

Practical action: keeping the March payslip and the P60 in the same place each year provides the audit trail for any later HMRC enquiry. Mortgage applications, immigration applications and Self-Assessment cross-checks all use the P60. Digital copies are acceptable provided they are issued to HMRC standards.

Where a payslip line is unclear, employees can ask the payroll team for a breakdown. Most large employers maintain a payroll helpdesk for exactly this purpose. Where the employer is uncooperative or cannot explain a deduction, the route is the unauthorised deductions claim under section 13 Employment Rights Act 1996, with the right to raise it at an employment tribunal within three months less one day of the deduction.

Frequently asked questions

What must a UK payslip show?

Under section 8 of the Employment Rights Act 1996, an itemised payslip must show gross pay, the amount and reason for every deduction, the net pay, and the method of payment. For workers (not just employees) entitled since April 2019, the requirements are the same. The payslip must be issued at or before the time of payment. Most employers also show year-to-date figures, tax code, NI category letter and pension scheme details by convention, though not strictly required by statute.

What's the difference between gross pay and taxable pay?

Gross pay is the headline figure before any deduction. Taxable pay is gross pay less pre-tax adjustments such as salary sacrifice into pension, cycle-to-work, or electric vehicle lease. PAYE and NI are calculated on taxable pay. Where mortgage applications or statutory pay calculations matter, the relevant figure may be gross or post-sacrifice depending on the lender or scheme - confirming with the employer's HR or payroll team avoids surprises.

Why does my payslip show a different number from my salary?

Several layers can change the cash figure: salary sacrifice reduces the headline gross; PAYE applies income tax based on year-to-date cumulative position (not annualised); NI is non-cumulative and depends on category letter; pension is either pre-tax (net pay) or post-tax (relief-at-source) with provider uplift; student loan applies 9% above the relevant plan threshold; any statutory deductions (court orders, CTAEO) apply. The cumulative columns over months show how the totals reconcile to the annualised position.

What is a category letter on a payslip?

The National Insurance category letter sets the rates and thresholds for the employee's NI calculation. A is the standard letter (employee under State Pension Age, no reduced rate). H is for apprentices under 25. M is for employees under 21. C is for employees over State Pension Age (zero employee NI). The letter changes automatically at age boundaries based on the employer's payroll system. Errors at birthday transitions are a common source of incorrect NI.

Can my employer make any deduction they want?

No. Deductions other than tax, NI, statutory contributions and court orders need either explicit consent in writing or a clear contractual provision. Section 13 of the Employment Rights Act 1996 prohibits unauthorised deductions. Examples of regulated deductions: shortfalls in retail cash floats (only for retail workers under section 17), repayment of training course costs (only with clear written agreement), uniforms (only where the contract permits and the worker is not below NMW). Disputed deductions can be challenged at an employment tribunal.