Most of us tend to focus mainly on the amount that’s just been paid into our bank account when we receive our wages, but there’s plenty of other useful information contained in your payslip.
As well as showing how much you’ve been paid each month, your payslip tells you how much you’ve paid in tax, along with how much has gone into your pension, if you belong to your company scheme.
Here, we explain what your payslip shows, and why this information matters.
Your payslip explained
Your payslip is an official record of your earnings and any deductions made by your employer. Depending on how often you’re paid, you might receive one monthly or weekly.
In the top left hand corner of your slip, you’ll usually find your employee or payroll number which is used to identify you for payroll purposes. This will typically be alongside your name, national insurance number, and the date the payslip was issued.
There are several other different elements that each payslip will show, which we explain below.
1. Your tax code and how you get paid
The bottom left hand side of your payslip will usually show your tax code, how your pay has been transferred to you (generally BACs, an electronic system to transfer money from one account to another), the payment period (weekly or monthly) and the tax period. The tax year runs from April 6 to April 5 the following year, which means April will be tax period 1 and December tax period 9.
Your tax code is used to deduct tax under the Pay As You Earn (PAYE) system, and lets your employer know how much tax-free pay you should get.
For example, each of us has a personal allowance of £12,570 in the 2023/24 tax year, which is the amount we can earn without having to pay tax. This is divided by 10 to determine your tax code, so most people have a tax code of 1257. This is followed by a letter, which is usually ‘L’ and means that you are eligible for the £12,570 personal allowance. If your tax code is showing as W1 or M1, these are emergency tax codes and mean that HMRC doesn’t have enough information about your income and tax details and you should get in touch with them to make sure you’re placed on the correct code.
2. Your gross pay
Your payslip must tell you how much you’ve earned before any deductions such as tax and National Insurance have been made, known as your gross earnings. It includes any bonuses, commission or overtime you’ve earned.
If you’re off work due to illness, then your payslip should show any Statutory or occupational Sick Pay you’re receiving.
3. Your net pay
Your net pay is the amount you’ll actually receive into your account, after deductions have been made. Your payslip will also show how much you’ve earned in the year to date (which may be abbreviated to YTD).
Bear in mind that if you lose your job halfway through the tax year, you may be entitled to a tax refund. Find out more in our guide How to claim a tax refund if you lose your job.
Deductions include National Insurance contributions and tax. If you’re employed, you’ll pay Class 1 National Insurance contributions at a rate of 12% on earnings between £1,048 and £4,189 a month (£242 to £967 a week), which is known as the Primary Threshold, and 2% on earnings over £4,189 a month, known as the Upper Earnings Limit.
4. Pension contributions
If you’re paying into a workplace pension, your payslip will tell you how much you’ve paid in, and how much your employer has contributed. Most people are automatically enrolled into their pension scheme under the auto-enrolment scheme. Find out more about how this works in our guide How does pension auto-enrolment work?
If you haven’t been enrolled into a workplace pension, perhaps because you’re working part-time or on a low salary, you can still ask to join the scheme if you want to. Learn more about this in our article Can I join my workplace pension scheme if I’m on a low salary?
5. Employee benefits
If you have any employee benefits, such as a company car or private medical insurance, these will also be shown on your payslip. Your payslip may also provide details of your repayment of and season-ticket loans, cycle-to-work scheme loans and charitable donations you make via give as you earn.
If you think any of the information shown on your payslips is incorrect, get in touch with your employer’s finance department as soon as possible and let them know your concerns.
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