Why is my take-home pay less than my salary?

Your employer deducts income tax, National Insurance, and usually a workplace pension contribution (plus student loan repayments if you have one) before paying you. Your salary is the 'gross' figure; what lands in your bank is the 'net' figure after these deductions.

What does the tax code 1257L mean?

1257L is the standard tax code for most employees in 2026/27. The numbers show your tax-free personal allowance with the last digit removed (£12,570), and the L means you're entitled to the standard allowance. If your code looks different — especially codes ending in W1, M1 or an emergency code — it's worth checking, as the wrong code means paying the wrong tax.

Do I pay income tax on my whole salary?

No — this is the most common payslip misunderstanding. You pay 0% on the first £12,570 (your personal allowance), then each rate only applies to the slice of income within that band. Moving into a higher tax band only means the income above the threshold is taxed at the higher rate — a pay rise never leaves you worse off overall through income tax.

Free tool

The Payslip Explainer

Nobody teaches you to read the most important document you receive every month. Set your salary below and see exactly where the money goes — with every deduction explained in plain English (tap "what's this?").

Using 2026/27 rates · England, Wales & NI

Annual salary £30,000

Pension contribution 5%

Student loan plan

Your payslip, decoded Monthly · Tax code 1257L

Gross pay £0

Your salary before anything is taken off — the number in the job advert. Everything below is subtracted from this. Payslips show it per pay period: an annual salary divided by 12.

Income tax (PAYE) −£0

Tax on your earnings, collected by your employer through PAYE ("Pay As You Earn") so you never have to hand it over yourself. Crucially, it's charged in slices: the first £12,570 a year is tax-free (your personal allowance), then 20% applies only to the slice between £12,571 and £50,270, then 40% on the slice above that, and 45% above £125,140. Nobody pays 40% "on everything" — a pay rise can't leave you worse off through income tax.

National Insurance −£0

A second tax on earnings, historically linked to funding the State Pension, NHS and certain benefits. Your NI record (built up by paying it, or receiving credits) determines your State Pension entitlement. Employees pay 8% on earnings between £12,570 and £50,270 a year, and 2% above that. Your employer also pays employer's NI on top of your salary — a cost you never see on the payslip.

Workplace pension −£0

The deduction that isn't really a loss — it's your money, moved to future-you. Under auto-enrolment, most employees contribute at least 5% while their employer must add at least 3% on top (free money you don't see here). Pension contributions usually come out before tax is calculated, so a £100 contribution costs a basic-rate taxpayer only £80 of take-home. This tool assumes that arrangement; schemes vary, so check yours. Want to see what these contributions become? Our Compound Interest Visualiser will cheer you up.

Student loan −£0

Less like a debt, more like a graduate tax: you repay 9% (6% for postgraduate loans) of income above your plan's threshold — nothing below it, regardless of what you owe. Earn under the threshold in a given month and that month's repayment is zero. The balance doesn't affect your credit score, and whatever remains after 25–40 years (depending on plan) is written off.

Take-home pay £0

Where each £1 of your salary goes

Take-home Income tax NI Pension Student loan

The honest small print

This is an educational illustration using standard 2026/27 rates for England, Wales and Northern Ireland, a standard 1257L tax code, and a pension deducted before tax. Real payslips vary: Scotland has different income tax bands, tax codes differ, some pension schemes work differently, and benefits, bonuses or salary sacrifice change the sums. It's not financial advice — for your specific tax position, GOV.UK's official tools and your own payslip are the source of truth, and MoneyHelper offers free guidance.

Three things your payslip is trying to tell you

1. Check your tax code — it's the number that controls everything. For most people in 2026/27 it should read 1257L (your £12,570 tax-free allowance with the last digit dropped). Started a new job and see an emergency code, or a code that looks odd? Millions of pounds are overpaid every year through wrong codes, and it's fixable with a call to HMRC or via your personal tax account on GOV.UK.

2. The pension line is the best deal on the slip. It stings to see money leave, but it triggers an employer contribution (a minimum of 3% they must pay on top of your salary) and usually comes out before tax. Opting out to boost this month's pay is one of the most expensive decisions a young earner can make — drag the pension slider above and watch how little your take-home changes compared to what goes in.

3. Tax bands work in slices, not cliffs. "I don't want a pay rise, it'll push me into the next tax bracket" is the most persistent money myth in Britain. Only the income above a threshold is taxed at the higher rate — try sliding the salary from £50,000 to £51,000 above and see the take-home rise, not fall.

Now you can see what actually lands each month, give those pounds a plan: the free budget planner is built for exactly that, and the £1,000 emergency fund is the classic first goal.

Payslip FAQs

Why did my first payslip have more tax than expected?

New starters are often put on an emergency tax code until HMRC confirms your details, which can mean overpaying temporarily. It usually corrects automatically within a payslip or two, and overpaid tax comes back — but it's worth checking your code rather than assuming.

What's the difference between gross and net pay?

Gross is your pay before deductions (the job-advert number); net is what actually reaches your bank. When budgeting, rent-to-income rules and the like should always use net — plenty of budgeting mistakes start by planning around the gross figure.

Does overtime or a bonus change my deductions?

Yes — tax, NI and student loan are calculated per pay period, so a big month means bigger deductions that month. For student loans especially, a bonus can trigger a repayment even if your annual income is below the threshold; you can reclaim those from the Student Loans Company after the tax year ends.

Why doesn't my payslip match this tool exactly?

Real payslips reflect your specific tax code, pension scheme type, benefits, salary sacrifice arrangements and any adjustments HMRC has made. This tool shows the standard case to teach the mechanics — your payslip is the personalised version.

The Payslip Explainer

Three things your payslip is trying to tell you

Payslip FAQs

Seen where it goes — now grow it