Understanding Your Payslip Deductions: Tax, NI, and More Explained

When you open your payslip, the deductions can sometimes feel like a mystery. Between tax, National Insurance, and other codes, it’s easy to lose track of what’s really going where. This guide breaks down the main deductions on your UK payslip — and what each one means.

💷 Income Tax (PAYE)

Your Income Tax is the amount you pay to HMRC based on your earnings.
Most UK employees pay tax through the PAYE (Pay As You Earn) system.

Your employer calculates and deducts this automatically each payday, using your tax code from HMRC.

Typical tax bands for 2024/25:

• £0 – £12,570 → 0% (Personal Allowance)
• £12,571 – £50,270 → 20% (Basic Rate)
• £50,271 – £125,140 → 40% (Higher Rate)

👉 Always check your tax code matches your situation. An incorrect code can lead to over- or under-paying tax.

💰 National Insurance (NI)

National Insurance contributions (NICs) go toward benefits like State Pension, maternity pay, and sick pay.

For employees, contributions are usually listed as “EE NIC” or “Employee NIC”.
Employers also pay a separate contribution (not shown on your payslip).

The amount you pay depends on your earnings band — roughly 12% on income above £1,048/month, tapering off at higher levels.

🎓 Student Loan Repayments

If you went to university, your payslip may show Student Loan deductions.
These begin once you earn above a certain threshold:

• Plan 1 → £24,990 per year
• Plan 2 → £27,295 per year
• Plan 4 (Scotland) → £31,395 per year
• Postgraduate Loan → £21,000 per year

Repayments are taken automatically at 9% of income over your threshold.

🏦 Pension Contributions

Many employers now offer auto-enrolment into a workplace pension.
Your contribution will appear as something like “EE Pension” or “Employee Pension”.

Typical contribution rates:

• Employee: 5%
• Employer: 3%

💡 Always review your pension deductions — opting out means you could miss valuable employer contributions.

🧾 Other Common Deductions

You might also see:

• Company benefits (healthcare, cycle-to-work schemes, etc.)
• Union fees
• Child maintenance payments

If anything looks unfamiliar, check with HR or payroll before payday.

📂 Why Checking Your Payslip Matters

Even small payroll errors can affect your tax record.
Make sure every month that:

• Your name, tax code, and NI number are correct.
• Deductions remain consistent with your contract.
• Your net pay matches what hits your account.

👉 If something’s off, contact payroll early — it’s much easier to fix before the next run.

🔗 Internal Links

• ➡️ Not sure what information should appear? Read What Should Be on a Payslip.
• ➡️ Compare with P60 vs Payslip: Which One Matters More.
• ➡️ Create your own accurate payslip instantly using our Free Payslip Creator.

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