How to read a payslip, line by line

A payslip is the record of one payday. Your employer must give you one on or before the day you are paid.

Gross pay

Everything you earned in the pay period, before anything is taken off.

Deductions

The amounts taken off, such as income tax, National Insurance and pension.

Net pay

What is left, and what is paid into your bank. It is also called take-home pay.

Net pay is gross pay less deductions. A salary in a job advert or a contract is a gross figure, so what reaches your bank is less.

Tax rates, the amount of pay that is free of tax, and the levels at which National Insurance and student loan repayments start change each tax year. None of them is given here: the current figures are on GOV.UK. Every deduction in this guide is given as an amount.

The top of a payslip says who is being paid, when, and how the tax was worked out.

Tax period

Which month or week of the tax year the payday falls in. The tax year starts on 6 April, so month 1 runs from 6 April to 5 May.

Tax code

A code that HMRC works out and sends to your employer. It tells the employer how much of your pay is free of income tax.

National Insurance number

Your own number, kept for life. It has two letters, six numbers and one last letter.

The pay lines come next. Basic pay is your salary for the period, or your hours times your hourly rate. Extra pay, such as overtime, a bonus or commission, is added to it to make gross pay.

Then the deductions, each on its own line.

Income tax

Taken from each payday by the employer and paid over to HMRC. This is PAYE, which stands for Pay As You Earn. It is worked out on the tax year so far, so a month of low pay can bring some tax back as a refund.

National Insurance

A deduction that is separate from income tax. Paying it builds up your right to the State Pension and to some benefits. Each payday is worked out on its own.

Pension

Your contribution to a workplace pension. Your employer adds its own contribution on top.

Student loan

A repayment taken through the payroll. HMRC tells the employer when to start.

Other deductions

A union subscription, a loan from the employer repaid in equal parts, or an amount a court has ordered the employer to take.

Income tax, National Insurance, student loan repayments and court orders are statutory: the law requires them, and you cannot refuse them. The others are voluntary, and the employer needs your agreement in writing. A pension counts as voluntary, because you can choose to leave the scheme.

Some payslips show the employer's National Insurance. It is the employer's own cost, shown for information, and it is never taken from your pay.

Year to date figures are totals for the tax year so far. They run from 6 April, not from 1 January.

Read a payslip in the order the figures are built: pay first, then deductions, then what is left.

1. Check that your name and your National Insurance number are right. The top of the payslip says whose pay this is.
2. Check gross pay against your own record. For a salary, divide the yearly figure by the number of paydays. For hourly pay, multiply the hours you worked by your rate. Add any overtime.
3. Check the tax code against the latest letter from HMRC.
4. Read each deduction and add them up.
5. Take the total deductions from gross pay. The answer must be the net pay on the payslip.
6. Compare net pay with the money that reached your bank.
7. Keep the payslip. It is proof of what you earned.

Ask your employer about pay, hours and deductions. Ask HMRC about your tax code: your employer must use the code it is given and cannot change it.

Quillfield Print pays its staff once a month. One of its printers has a salary of £25,800.00 a year, paid in 12 equal parts, so basic pay is £2,150.00 a month. In June the printer also earns £180.00 of overtime.

A figure in brackets is a deduction: money taken off before you are paid.

Gross pay is £2,150.00 plus £180.00, which is £2,330.00. The four deductions come to £477.90. Net pay is £2,330.00 less £477.90, which is £1,852.10.

The pay date is 28 June. Month 3 of the tax year runs from 6 June to 5 July, so the payslip says month 3. The printer was paid £2,150.00 gross in April and again in May, so gross pay for the year to date is £6,630.00.

• Reading gross pay as the money you will receive. Gross is before deductions. Net pay is what reaches the bank.
• Expecting the whole of a pay rise or of overtime in your bank. Tax, National Insurance and pension are worked out on the bigger gross figure, so part of any extra pay goes in deductions.
• Treating income tax and National Insurance as one deduction. They are two sums, each with its own starting amount and its own rate.
• Counting the employer's National Insurance as money taken from you. It is a cost to the employer, on top of your pay.
• Reading year to date as the calendar year. It is the tax year so far.
• Asking the employer to change a tax code. Only HMRC can put a tax code right.

• The hours and the rate, or the salary, match your own record.
• Gross pay less every deduction equals net pay, to the penny.
• Net pay equals the amount that reached your bank.
• The tax code matches the latest letter from HMRC.
• Gross pay for the year to date is last payday's year to date figure plus this payday's gross pay.

If a figure is wrong, put the question to the right place. Pay, hours and deductions are the employer's job to put right. The tax code is for HMRC.