Save time for your HR team with this Excel payslip template.<\/h4>\n \n
A standard payroll model made in Excel based on the HMRC template that you can use to prepare your employees' payroll.<\/p>\n \n \n Download for free <\/a>\n <\/div>\n\n Employers must provide employees and workers with a payslip on or before payday. This document shows an employee exactly how their pay has been calculated, and employers are subject to record-keeping regulations according to GOV UK<\/a>. A wageslip\u2013which is synonymous with payslip\u2013must show:<\/p>\n Payslips can be provided on paper or electronically.<\/p>\n Many payslips also include information such as:<\/p>\n As an employer, this information is easier to keep track of if you use an employee portal as part of your HR software that helps with payroll preparation<\/a>. However, when it comes to payslips, the three figures that employees are usually most interested in are gross pay, deductions, <\/strong>and net pay.<\/strong><\/p>\n Gross pay is the employee’s pay before deductions are taken.<\/p>\n This could include:<\/p>\n For example, if an employee earns a salary of \u00a32,500 per month and receives a \u00a3200 bonus, their gross pay for that month would be:<\/p>\n \u00a32,500 + \u00a3200 = \u00a32,700 gross pay<\/p><\/blockquote>\n Net pay is the amount left after the necessary deductions have been made. It is what we call take-home pay, because it is what the employee receives, which is “taken home.” This is the amount paid into the employee’s bank account.<\/p>\n A simple formula is:<\/p>\n Gross pay – deductions = net pay<\/p><\/blockquote>\n For example:<\/p>\n Gross pay: \u00a33,000<\/p>\n PAYE tax: \u00a3390.50<\/p>\n National Insurance: \u00a3156.16<\/p>\n Net pay before any other deductions:<\/p>\n \u00a33,000 – \u00a3390.50 – \u00a3156.16 = \u00a32,453.34<\/p><\/blockquote>\n Calculating pay and creating a payslip is one of the most important things employers need to get right, and it is something you need to devote extra care to each month as part of your payroll<\/a>. But before calculating pay, you need some basic information about the employee and the pay period.<\/p>\n To calculate gross pay, start with everything the employee is being paid during that payroll period.<\/p>\n For a salaried employee paid monthly, you can usually calculate their basic monthly salary by dividing their annual salary by 12, for the 12 months of the year.<\/p>\n For example:<\/p>\n Annual salary: \u00a336,000<\/p>\n \u00a336,000 \u00f7 12 = \u00a33,000 per month<\/p><\/blockquote>\n You then need to add any additional taxable payments<\/strong>, such as overtime<\/a>, commission like OTE<\/a>, or other bonuses<\/a>. Learn all about how to pay employees in our article on compensation management<\/a>.<\/p>\n The employee’s tax code tells payroll how much tax-free income they are entitled to and how Income Tax should be calculated.<\/p>\n A common tax code is 1257L.<\/p>\n The numbers in a tax code usually indicate the employee’s tax-free allowance. Multiplying 1257 by 10 gives:<\/p>\n 1257 \u00d7 10 = \u00a312,570<\/p><\/blockquote>\n This matches the standard Personal Allowance<\/a> for the 2026\/27 tax year.<\/p>\n Not everyone has the same tax code.<\/p>\n For example, an employee may have a different code if they:<\/p>\n Scottish taxpayers normally have an S at the beginning of their tax code, while Welsh taxpayers may have a C. Consult our article on the subject for more tax codes<\/a>.<\/p>\n Employers should always use the tax code supplied by HMRC<\/a> rather than trying to choose a tax code themselves.<\/p>\n To calculate wages correctly, you also need the employee’s National Insurance<\/a> category letter. Many employees fall into Category A, but different categories can apply depending on circumstances such as age, apprenticeship status or whether the employee qualifies under certain employer schemes.<\/p>\n Your payroll software<\/a> normally uses the category letter to apply the correct National Insurance rates.<\/p>\n You should also check whether anything else needs to be deducted from the employee’s pay.<\/p>\n Deductions might include:<\/p>\n These deductions can all affect the employee’s final net pay.<\/p>\n Here is a simple way to understand how to calculate pay in order to create a payslip.<\/p>\n Begin with the employee’s total pay before deductions.<\/p>\n For a monthly employee earning \u00a336,000 per year:<\/p>\n \u00a336,000 \u00f7 12 = \u00a33,000 gross monthly pay<\/p><\/blockquote>\n If they also received a taxable bonus of \u00a3500 that month:<\/p>\n \u00a33,000 + \u00a3500 = \u00a33,500 gross pay<\/p><\/blockquote>\n Next, check which tax code applies.<\/p>\n For someone with the standard 1257L tax code, the annual Personal Allowance is normally \u00a312,570.<\/p>\n This means that, in simple terms, the first \u00a312,570 of annual income can be earned without paying Income Tax<\/strong>.<\/p>\n For the 2026\/27 tax year, the standard Personal Allowance remains \u00a312,570.<\/p>\n However, the Personal Allowance starts to reduce when adjusted net income exceeds \u00a3100,000 and can fall to zero for higher earners.<\/p>\n PAYE stands for Pay As You Earn<\/em>. In case you missed it, check out more HR abbreviations and terms<\/a>.<\/p>\n PAYE<\/a> is the system employers use to deduct Income Tax from an employee’s wages before paying them.<\/p>\n For employees in England, Wales and Northern Ireland, according to official sources<\/a>,\u00a0the main 2026\/2027 Income Tax bands are:<\/p>\n These bands apply after taking account of the employee’s Personal Allowance.<\/p>\n For example, an employee earns \u00a336,000 per year and has the standard \u00a312,570 Personal Allowance.<\/p>\n Their taxable income is:<\/p>\n \u00a336,000 – \u00a312,570 = \u00a323,430<\/p><\/blockquote>\n All \u00a323,430 falls within the 20% basic-rate band.<\/p>\n Income Tax for the year:<\/p>\n \u00a323,430 \u00d7 20% = \u00a34,686<\/p><\/blockquote>\n For a simple employee receiving the same salary every month:<\/p>\n \u00a34,686 \u00f7 12 = \u00a3390.50 per month<\/p><\/blockquote>\n The PAYE deduction<\/strong> is therefore approximately \u00a3390.50.<\/p>\n In practice, payroll software calculates PAYE using the employee’s tax code and tax history. Most tax codes operate on a cumulative basis, which means previous pay and tax from the same tax year can affect the amount deducted in the current month.<\/p>\n For this reason, manual calculations are useful for understanding a payslip, but payroll software should be used for the final payroll calculation to make sure it is correct.<\/p>\n Employees who are Scottish taxpayers have different Income Tax bands.<\/p>\n For 2026\/2027, Scottish employment income<\/a> can be taxed at rates of 19%, 20%, 21%, 42%, 45% and 48%, depending on the employee’s taxable income.<\/p>\n The standard Personal Allowance is still \u00a312,570.<\/p>\n A Scottish employee will normally have an S<\/strong> at the start of their tax code.<\/p>\n Because the Scottish bands are different, you should not use the England, Wales and Northern Ireland examples in this article to calculate PAYE for an employee with a Scottish tax code.<\/p>\n National Insurance is separate from Income Tax.<\/p>\n For most Category A employees<\/a> in 2026\/27, employee National Insurance is charged at:<\/p>\n According to GOV.UK<\/a>, the equivalent weekly Primary Threshold is \u00a3242 and the Upper Earnings Limit is \u00a3967.<\/p>\n Suppose an employee earns \u00a33,000 per month<\/em>.<\/p>\n The first \u00a31,048<\/em> is not subject to employee National Insurance.<\/p>\n That leaves:<\/p>\n \u00a33,000 – \u00a31,048 = \u00a31,952<\/p><\/blockquote>\n The employee pays 8% on this amount:<\/p>\n \u00a31,952 \u00d7 8% = \u00a3156.16<\/p><\/blockquote>\n Their employee National Insurance deduction is therefore \u00a3156.16.<\/p>\n Unlike PAYE Income Tax, employee National Insurance is generally calculated separately for each pay period<\/strong> rather than using a cumulative annual calculation.<\/p>\n Once PAYE and National Insurance have been calculated, check whether there are other deductions.<\/p>\n For example, an employee may have:<\/p>\n These deductions also reduce the net pay\u2013the amount eventually paid to the employee.<\/p>\n Remember that different deductions are treated differently for tax and National Insurance purposes. For example, some pension and salary sacrifice arrangements can change the amount of pay subject to tax or National Insurance. Payroll software should apply these rules based on how the deduction has been set up.<\/p>\n Finally, calculate pay from what is left.<\/p>\n In its simplest form:<\/p>\n Gross pay – PAYE – employee National Insurance – other deductions = net pay<\/p><\/blockquote>\n For example:<\/p>\n Gross pay: \u00a33,000<\/p>\n PAYE: \u00a3390.50<\/p>\n National Insurance: \u00a3156.16<\/p><\/blockquote>\n If there are no other deductions:<\/p>\n \u00a33,000 – \u00a3390.50 – \u00a3156.16 = \u00a32,453.34<\/p><\/blockquote>\n The employee’s estimated net pay<\/strong> is therefore \u00a32,453.34.<\/p>\n The examples below use the 2026\/27 rates and assume that the employee:<\/p>\n They are simplified examples designed to explain the calculation. An employee’s actual PAYE figure can differ depending on their tax code and previous earnings.<\/p>\n The employee earns \u00a324,000 per year.<\/strong><\/p>\n Monthly gross pay:<\/p>\n \u00a324,000 \u00f7 12 = \u00a32,000<\/p><\/blockquote>\n \u00a324,000 – \u00a312,570 = \u00a311,430<\/p><\/blockquote>\n The employee remains within the basic-rate tax band.<\/p>\n \u00a311,430 \u00d7 20% = \u00a32,286<\/p><\/blockquote>\n \u00a32,286 \u00f7 12 = \u00a3190.50<\/p><\/blockquote>\n Monthly earnings above the \u00a31,048 Primary Threshold:<\/p>\n \u00a32,000 – \u00a31,048 = \u00a3952<\/p><\/blockquote>\n National Insurance:<\/p>\n \u00a3952 x 8% = \u00a376.16<\/p><\/blockquote>\n \u00a32,000 – \u00a3190.50 – \u00a376.16 = \u00a31,733.34<\/p><\/blockquote>\n The employee therefore takes home approximately \u00a31,733.34 per month, before any additional deductions.<\/p>\n The employee earns \u00a336,000 per year.<\/p>\n Monthly gross pay:<\/p>\n \u00a336,000 \u00f7 12 = \u00a33,000<\/p><\/blockquote>\n \u00a336,000 – \u00a312,570 = \u00a323,430<\/p>\n \u00a323,430 x 20% = \u00a34,686 per year<\/p>\n \u00a34,686 \u00f7 12 = \u00a3390.50<\/p>\n \u00a33,000 – \u00a31,048 = \u00a31,952<\/p>\n \u00a31,952 \u00d7 8% = \u00a3156.16<\/p><\/blockquote>\n \u00a33,000 – \u00a3390.50 – \u00a3156.16 = \u00a32,453.34<\/p>\n The employee therefore receives approximately \u00a32,453.34 per month, before any other deductions.<\/p>\n In this example, the employee earns \u00a360,000 per year.<\/p>\n Monthly gross pay:<\/p>\n \u00a360,000 \u00f7 12 = \u00a35,000<\/p><\/blockquote>\n \u00a360,000 – \u00a312,570 = \u00a347,430<\/p><\/blockquote>\n The first \u00a337,700 of taxable income is taxed at 20%:<\/p>\n \u00a337,700 \u00d7 20% = \u00a37,540<\/p><\/blockquote>\n The remaining taxable income is:<\/p>\n \u00a347,430 – \u00a337,700 = \u00a39,730<\/p><\/blockquote>\n This falls into the 40% higher-rate band:<\/p>\n \u00a39,730 x 40% = \u00a33,892<\/p><\/blockquote>\n Total annual Income Tax:<\/p>\n \u00a37,540 + \u00a33,892 = \u00a311,432<\/p><\/blockquote>\n \u00a311,432 \u00f7 12 = \u00a3952.67<\/p><\/blockquote>\n National Insurance also needs two calculations<\/strong> because monthly earnings are above the \u00a34,189 Upper Earnings Limit.<\/p>\n NI between \u00a31,048 and \u00a34,189:<\/p>\n \u00a34,189 – \u00a31,048 = \u00a33,141<\/p>\n \u00a33,141 x 8% = \u00a3251.28<\/p><\/blockquote>\n NI above \u00a34,189:<\/p>\n \u00a35,000 – \u00a34,189 = \u00a3811<\/p>\n \u00a3811 x 2% = \u00a316.22<\/p><\/blockquote>\n Total employee National Insurance:<\/p>\n \u00a3251.28 + \u00a316.22 = \u00a3267.50<\/p><\/blockquote>\n Estimated net pay:<\/p>\n \u00a35,000 – \u00a3952.67 – \u00a3267.50 = \u00a33,779.83<\/p><\/blockquote>\n The employee therefore receives approximately \u00a33,779.83 per month, before pension contributions or any other deductions.<\/p>\n When managing payroll, once you have calculated pay, you should check the figures carefully before issuing the wageslip and making the payment to the employee.<\/p>\n This includes checking:<\/p>\n Employers must send employees their payslip on or before payday. This is easily done with HR automation<\/a>.<\/p>\n Payroll information must also be reported to HMRC<\/a> through a Full Payment Submission, usually known as an FPS. The FPS includes information such as taxable pay, tax deducted, student loan deductions, and other figures from the payroll calculation.<\/p>\n Checking payroll data before submission helps reduce the risk of incorrect deductions, payroll corrections, and questions from employees after payday.<\/p>\n Calculating a UK payslip starts with gross pay and finishes with net pay. In between, employers need to apply the employee’s tax code, calculate PAYE Income Tax, calculate employee National Insurance, and include any other relevant payroll deductions. Calculating PAYE, National Insurance, and net pay is only one part of running payroll.<\/p>\n You also need to manage working hours, bonuses, expenses, benefits, and absences. Handling this information across spreadsheets and emails can take time and lead to errors. Accurate payroll records and connected payroll data with payroll preparation<\/a> make it much easier to get the calculation right every month.<\/p>\n Factorial brings your payroll data together in one place and helps automate payroll tasks. Request a free demo<\/a><\/strong> to see the platform in action.<\/p>\n![](\"https:\/\/factorialhr.co.uk\/blog\/app\/plugins\/factorial-utilities\/assets\/images\/banners\/inline\/backgrounds\/default_image.svg\")
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Centralise and automate your payroll processing with confidence<\/h4>\n \n
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\n <\/div>\n <\/div>\n<\/div>\nWhat is gross pay?<\/h3>\n
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What is net pay?<\/h3>\n
What you need to calculate a UK payslip<\/h2>\n
The employee’s gross pay<\/h3>\n
The employee’s tax code<\/h3>\n
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The employee’s National Insurance category<\/h3>\n
Other deductions<\/h3>\n
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Step-by-step instructions for calculating PAYE, National Insurance and net pay<\/h2>\n
Step 1: Calculate gross pay<\/h3>\n
Step 2: Check the employee’s tax code<\/h3>\n
Step 3: Calculate PAYE Income Tax<\/h3>\n
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What about Scottish Income Tax?<\/h4>\n
Step 4: Calculate employee National Insurance<\/h3>\n
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Step 5: Calculate any other deductions<\/h3>\n
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Step 6: Calculate net pay<\/h3>\n
Example scenarios of calculating a UK payslip<\/h2>\n
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Payslip Calculation Example 1: \u00a324,000 salary<\/h3>\n
1. First, calculate annual taxable income:<\/h4>\n
2. Annual Income Tax:<\/h4>\n
3. Approximate monthly PAYE:<\/h4>\n
4. Now calculate National Insurance.<\/h4>\n
Estimated net pay:<\/strong><\/h4>\n
Payslip Calculation Example 2: \u00a336,000 salary<\/h3>\n
1. Annual taxable income:<\/h4>\n
2. Income Tax:<\/h4>\n
3. Approximate monthly PAYE:<\/h4>\n
4. Now calculate National Insurance:<\/h4>\n
Estimated net pay:<\/h4>\n
Payslip Calculation Example 3: \u00a360,000 salary<\/h3>\n
1. Annual taxable income:<\/h4>\n
2. Approximate monthly PAYE:<\/h4>\n
3. Calculate National Insurance<\/h4>\n
After calculating a payslip<\/h2>\n
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Simplify your payroll with Factorial<\/h2>\n
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<\/p>\nCentralise and automate your payroll processing with confidence<\/h4>\n \n
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