Your First UK Payslip: PAYE, National Insurance and Tax Codes Explained

Your first UK payslip is genuinely confusing the first time you see it — a string of unfamiliar codes and deductions on top of a number that's smaller than the salary you agreed to. None of it is a mistake. Here's what every line actually means.

Gross vs net: the gap you're actually seeing

Your gross pay is the salary you agreed to before anything is taken off. Your net pay — what actually lands in your bank account — is gross pay minus Income Tax, National Insurance, and any pension contribution. For 2026/27, the gap between the two is entirely predictable once you know the rates, which is the point of this guide.

Income Tax: what you actually pay, and from what point

You don't pay tax on your first £12,570 of annual income — this is your Personal Allowance. Above that, for 2026/27:

• £12,571 to £50,270: taxed at 20% (basic rate)
• £50,271 to £125,140: taxed at 40% (higher rate)
• Above £125,140: taxed at 45% (additional rate)

Crucially, these rates only apply to the portion of income within that band, not your entire salary. Earning £30,000 doesn't mean paying 20% on all of it — the first £12,570 is still tax-free, and only the remaining £17,430 is taxed at 20%.

National Insurance: the second deduction people forget about

National Insurance is separate from Income Tax and funds different things (state pension, certain benefits). For 2026/27, employees pay 8% on earnings between £12,570 and £50,270 a year, and 2% on anything above that. It's calculated per pay period, not as a single annual figure, so it appears on every single payslip alongside Income Tax.

Your tax code: the letters that actually matter

Your tax code tells your employer how much of your income is tax-free. The standard code for 2026/27 is 1257L, reflecting the £12,570 Personal Allowance. If you see BR (Basic Rate) instead, it usually means your employer doesn't yet have your full tax information and is taxing all your income at 20% with no tax-free portion applied — common in your very first pay period before HMRC records catch up, and normally corrects itself, or can be corrected by contacting HMRC directly if it doesn't.

Pension contributions: the deduction that isn't a tax

If you're auto-enrolled into a workplace pension (standard for most employees earning above a set threshold), a percentage of your salary is deducted and paid into a pension pot in your name — this money isn't lost, it's yours, just inaccessible until retirement age. You can usually opt out, but most financial guidance recommends staying enrolled, especially since employers are legally required to contribute alongside you.

A worked example

On a £35,000 salary (roughly £2,917 a month gross): the first £1,047.50 a month is tax-free, the rest is taxed at 20%, and National Insurance takes 8% of everything above the £1,047.50 monthly threshold. After tax, National Insurance, and a typical 5% pension contribution, take-home pay lands somewhere around £2,250-£2,350 a month — the exact figure depends on your specific tax code and pension rate.

What to actually check on your first payslip

1. Confirm your tax code isn't BR or an emergency code beyond your first pay period — if it still is, contact HMRC or your payroll team directly.
2. Check your National Insurance number is listed correctly — an error here can cause real problems down the line.
3. Confirm the pension contribution percentage matches what you were told at onboarding.
4. Keep every payslip — you'll need them for future visa applications, mortgage applications, or if HMRC ever queries your tax history.