Your Money
Most people get their first payslip and have no idea what half of it means. Here is every line, explained.
Figures reflect UK data as of 2026. Always verify specifics before making financial decisions.
Your gross pay is what your employer agreed to pay you. Your net pay is what actually lands in your bank account. The gap between them is made up of income tax, National Insurance, pension contributions, and — if applicable — student loan repayments. None of it is complicated once you understand what each deduction is for.
Gross pay is your salary before any deductions. If your contract says £26,000, that is your gross pay. Net pay — sometimes called take-home pay — is what you receive after tax and other deductions. For most people on a £26,000 salary in 2025/26, net pay is approximately £21,250 per year, or around £1,771 per month.
The difference can feel alarming at first. It is not a mistake. It is how PAYE (Pay As You Earn) works — your employer deducts tax and National Insurance before the money ever reaches you, and pays it directly to HMRC on your behalf.
Income tax is charged on your earnings above the personal allowance — the amount you can earn each year without paying any income tax at all. In 2025/26, that allowance is £12,570.
Above that threshold, rates are:
On a £26,000 salary: you pay 20% on £13,430 (the amount above the personal allowance) = £2,686 per year, or roughly £223 per month.
National Insurance (NI) is a separate deduction that funds the NHS, state pension, and certain benefits. As an employee in 2025/26, you pay 8% on earnings between £12,570 and £50,270.
On a £26,000 salary: 8% of £13,430 = £1,074 per year, or roughly £89.50 per month.
Your employer also pays their own NI contribution on your behalf — this doesn't come out of your salary, but it is a real cost to them. At 13.8% on earnings above £9,100, employing someone on £26,000 costs the employer considerably more than £26,000 in total.
If you are aged 22 or over and earn more than £10,000 per year, your employer is legally required to auto-enrol you into a workplace pension. The minimum contributions are:
On a £26,000 salary, qualifying earnings are £19,760 (£26,000 minus £6,240). Your 5% contribution is approximately £990 per year or £82.50 per month. Your employer adds at least £594/year on top. You can opt out of auto-enrolment — but if you do, you immediately lose your employer's contribution, which is free money you will never get back.
If you have a student loan, repayments are collected through PAYE automatically once your earnings exceed the repayment threshold. The threshold depends on your loan plan:
On a £26,000 salary on Plan 5: 9% of £1,000 = £90/year = £7.50/month. The amount increases as your salary rises. On a salary below the threshold, nothing is deducted and interest still accrues.
Here is exactly what happens to a £26,000 annual salary in 2025/26, with no student loan:
| Item | Annual | Monthly |
|---|---|---|
| Gross salary | £26,000 | £2,167 |
| Income tax (20% above £12,570) | − £2,686 | − £224 |
| National Insurance (8% above £12,570) | − £1,074 | − £90 |
| Pension (5% of qualifying earnings) | − £990 | − £83 |
| Net take-home pay | ≈ £21,250 | ≈ £1,771 |
Your employer is also contributing approximately £594/year into your pension on top of your salary — making your total pension contribution around £1,584/year from a £26,000 salary.
Your employer's 3% pension contribution is free money — opting out is one of the most expensive financial mistakes you can make at 18. The deductions on your payslip are not losses. Tax funds public services you use. Your pension contribution is building future wealth you cannot touch but cannot lose. Understand each line, check it is correct, and do not opt out of anything without fully understanding what you are giving up.
Two levels, ten questions each. See how much you took in.