Gross pay is earnings before deductions; net pay is what reaches your bank. A payslip should show pay, tax, employee National Insurance, pension and any student-loan or other deductions.
A job offer's salary is not a spending number. Understanding the payslip helps you spot a wrong tax code, missing pension contribution or unexpected deduction.
The useful points
- PAYE normally collects Income Tax through payroll using a tax code.
- For most employees in 2026–27, Class 1 NI is 8% in the main band and 2% above it; thresholds and categories matter.
- Employee pension contributions reduce take-home pay, while the employer contribution is extra value rather than salary paid to you.
- Student-loan deductions depend on your plan and pay-period earnings.
- Salary sacrifice means giving up contractual salary for a benefit; it can change tax, NI and figures used for some benefits or borrowing, so read the scheme terms.
- Benefits such as paid leave, pension, training and insurance can materially change the package value.
Read a payslip from gross to net
Start with contractual pay and additions such as overtime, then identify each deduction. Tax, National Insurance, pension and student-loan deductions follow different rules. Employer pension contributions and some benefits may appear for information but are not amounts taken from the employee's net pay.
- Check hours, rate, pay period and taxable pay before the deductions.
- Compare the tax code with HMRC's record.
- Keep payslips because landlords, lenders and benefit claims may request evidence.
Judge the whole employment package
Two jobs with the same salary can produce different value once pension matching, paid leave, training, travel, bonuses and insurance are included. Salary sacrifice may improve tax efficiency for some benefits, but it can also change contractual pay used for borrowing, statutory payments or other calculations.
- Value guaranteed benefits separately from discretionary bonuses.
- Ask whether pension percentages apply to full salary or qualifying earnings.
- Budget from conservative net pay until the first accurate payslip arrives.
Illustrative monthly payslip
Gross pay £2,400; Income Tax £270.50; employee NI £108.16; pension £94; Plan 1 loan £14.25. Employer pension £56.40 is shown separately and is not deducted. Exact payroll depends on tax code, pension basis and pay timing.
£2,400 − £270.50 − £108.16 − £94 − £14.25 = £1,913.09 illustrative net pay.What this means for you
Use the same steps with your own figures. Change one assumption at a time and check that essentials still fit before committing.
Common traps
- Budgeting from gross salary
- Ignoring an emergency tax code
- Opting out of a pension without valuing employer contributions
A realistic action list
- Check name, pay period and tax code
- Match net pay to the bank
- Ask payroll quickly about an unexplained item