TL;DR: Too long, Didn’t read
Gross vs. Net: Gross is what you earn on paper. Net is what actually hits your bank account after the government takes its share.
Your Tax Code: This is the most important part. 1257L is the standard code. If yours says BR or 0T, you might be paying huge emergency tax.
National Insurance: This is a separate tax for state benefits (like the NHS and State Pension).
Check It Monthly: Mistakes happen. If your tax code changes suddenly, you need to call HMRC immediately.
You get your email notification: “Your payslip is ready.” You open it, look at the bottom right number (the money you actually get), and close it.
But wait. Why is that number lower than you expected? What is “PAYE”? And why does your tax code say “K100”?
If you don’t check your payslip, you could be losing hundreds of pounds a year in wrong tax calculations.
The Big Two: Gross vs. Net
Gross Pay: This is your salary on paper. If you earn £30,000 a year, your monthly Gross Pay is £2,500.
Net Pay: This is your Take Home Pay. This is what is left after Tax, National Insurance, and Pension are taken out.
A Quick Story: Meet Alex
Alex starts a new job. His salary is £2,500 a month.
He gets his first payslip, but only receives £1,900.
He checks the code: It says “BR”.
This means “Basic Rate”—HMRC thinks this is a second job, so they are taxing him 20% on everything without a tax-free allowance.
The Verdict: Alex calls HMRC. They fix the code to 1257L, and he gets a £200 refund in his next pay packet. Checking the code saved him money.
Decoding The Deductions (Where the money goes)
1. PAYE (Income Tax) “Pay As You Earn.”
This is your main income tax.
You usually pay 0% on the first £12,570 you earn (Personal Allowance).
You pay 20% on anything above that (up to £50,270).
2. National Insurance (NI)
This is separate from Income Tax. It funds the NHS and benefits.
You pay this if you earn more than £242 a week (2024/25 rates).
3. Pension Contributions
You will usually see a deduction for “Pension.”
Good News: This isn’t a tax. It’s your money, being saved for later. Your employer also adds money to this pot for free. Do not opt out unless you really have to!
The Secret Language: Tax Codes Explained
Your Tax Code tells your boss how much cash to take from you. It is usually a number followed by a letter.
1257L: The standard code for most people. It means you have a tax-free allowance of £12,570.
BR (Basic Rate): Danger! This means you are being taxed 20% on everything. Common if you have two jobs or HMRC doesn’t know you switched jobs.
0T: Danger! You have zero tax-free allowance. This often happens when a new boss doesn’t have your P45 yet.
M / N: Marriage Allowance codes (you are transferring allowance to/from a partner).
K: You have “negative” allowance (usually because you owe tax from a previous year or have a company car).
Common Mistakes to Spot
1. The “Emergency Tax” Trap
If you see W1, M1, or X at the end of your code, you are on emergency tax.
Fix: Log in to your HMRC Personal Tax Account online and update your employment details.
2. Wrong Name / NI Number
Check the top of the slip. Is the National Insurance number correct? If it’s wrong, your pension contributions might not be counted correctly towards your future State Pension.
Summary: It’s Your Money
Don’t just look at the bottom line. Spend 30 seconds checking the Tax Code.
Is it 1257L? You are likely fine.
Is it BR or 0T? You are likely overpaying.
Fix it: Call HMRC on 0300 200 3300.
(Sources: Gov.uk – Check your tax code, MoneyHelper – Understanding your payslip)
This guide is for information purposes only. Tax rules change every April. Always verify your code with HMRC directly.