You have got your first proper job. The offer letter says £28,000. You have done the mental maths — that is over two thousand pounds a month. You are already thinking about the flat you are going to rent, the holiday you are going to book, the fact that you can finally stop eating supermarket own-brand everything.
Then your first payslip arrives. And the number is... smaller. Noticeably smaller. Where has the money gone?
If you have just had this experience, welcome to the world of payroll deductions. It is confusing the first time, slightly annoying the second time, and eventually just becomes part of life. But understanding where your money goes — and why — is genuinely useful. It helps you budget properly, spot mistakes, and make smarter decisions about your finances from day one.
So let us go through your payslip line by line.
Gross Pay vs Net Pay: The Two Numbers That Matter Most
Gross pay is the amount your employer pays you before any deductions. On a £28,000 annual salary, your monthly gross pay is £2,333.33.
Net pay (also called take-home pay) is what actually lands in your bank account after everything has been taken off. On £28,000, your monthly net pay is roughly £1,917.
The difference — about £416 per month — goes to income tax, National Insurance, and potentially student loan repayments and pension contributions. Run your exact salary through our salary calculator and you will see the full breakdown in seconds.
Income Tax: The Big One
Income tax is the largest deduction on most people's payslips. In the 2025/26 tax year, it works like this:
- Personal Allowance: £12,570. This is the amount you can earn completely tax-free. Everyone gets it (unless you earn over £100,000, at which point it starts being taken away).
- Basic Rate: 20%. You pay 20p in tax for every pound you earn between £12,571 and £50,270.
On a £28,000 salary, your taxable income is £28,000 minus £12,570 = £15,430. At 20%, that means you pay £3,086 in income tax for the year, or about £257 per month.
That might seem like a lot, but here is a useful way to think about it: your effective tax rate — the percentage of your total salary that goes to income tax — is only about 11%. The personal allowance means you are not paying 20% on everything, just on the amount above £12,570.
National Insurance: What It Is and What It Pays For
National Insurance contributions are the second deduction on your payslip. A lot of people see "NI" on their payslip and have no idea what it actually is.
In simple terms, National Insurance is a separate tax that funds specific things: the State Pension, the NHS, and certain benefits like Jobseeker's Allowance and Maternity Allowance. Unlike income tax, which goes into one big government pot, NI is earmarked for these specific programmes.
For 2025/26, employees pay 8% NI on earnings between £12,570 and £50,270, and 2% above that.
On a £28,000 salary, your NI works out to roughly £1,234 per year, or £103 per month. Our National Insurance calculator breaks this down in detail, showing you exactly what you pay at each threshold.
One important thing to know: paying National Insurance builds up your entitlement to the State Pension. You need 35 qualifying years of NI contributions to get the full State Pension. At 22, you have got plenty of time — but it is good to know that those NI payments are not just vanishing. They are building towards something.
Your Tax Code: The Letters and Numbers That Control Everything
Somewhere on your payslip you will see a tax code. For most people starting their first job, it will be 1257L. This code tells your employer how much of your salary is tax-free.
The number part (1257) represents your personal allowance in hundreds — £12,570. The letter (L) means you are entitled to the standard personal allowance. Your employer uses this code to work out how much income tax to deduct each month.
If your tax code is wrong, you could be paying too much or too little tax all year. Common mistakes include:
- Being put on an emergency tax code (often 1257L M1 or 1257L W1), which does not account for your full annual allowance
- Having the wrong code because HMRC thinks you have two jobs or untaxed income
- Not getting the right code after changing jobs mid-year
Our tax code calculator explains what your code means and helps you check whether it is correct. If it is wrong, you can contact HMRC to get it fixed — and you might be owed a refund.
Student Loan Repayments: The Deduction That Catches Graduates Off Guard
If you went to university in England or Wales and took out a student loan, repayments start automatically once your salary exceeds a certain threshold. The amount and threshold depend on which plan you are on:
- Plan 2 (started uni in England or Wales from September 2012): you repay 9% of everything you earn above £27,295
- Plan 5 (started uni from September 2023): you repay 9% of everything above £25,000
On a £28,000 salary with a Plan 2 loan, you are only £705 above the threshold. That means you repay 9% of £705 = roughly £63 per year, or about £5 per month. It is small at this salary level, but it increases as your salary grows.
At £35,000, your annual repayment would be about £694. At £45,000, it would be about £1,594. Our student loan calculator shows exactly what you will repay at any salary and estimates how long it will take to pay off your balance (or whether it will be written off after 30 or 40 years — yes, that is a real thing).
Pension Contributions: The Money You Will Thank Yourself For Later
By law, your employer must automatically enrol you into a workplace pension scheme. The minimum contribution is 8% of your qualifying earnings — 5% from you and 3% from your employer.
On a £28,000 salary, your 5% pension contribution is about £1,400 per year, or £117 per month. This comes off before you receive your take-home pay. And yes, it does make your payslip look smaller.
But here is the thing: that 3% employer contribution is free money. On £28,000, your employer is putting about £840 a year into your pension on top of your salary. You cannot get that money any other way. Opting out of your pension means losing that employer contribution — and at 22, the power of compound growth over 40+ years is enormous.
Our pension calculator can show you how your pension pot grows over time with different contribution rates. Even at modest salaries, starting early makes a massive difference.
Putting It All Together: Your £28,000 Payslip
So here is what a typical monthly payslip looks like on a £28,000 salary in 2025/26:
- Gross monthly pay: £2,333
- Income Tax: -£257
- National Insurance: -£103
- Student Loan (Plan 2): -£5
- Pension (5%): -£117
- Net take-home pay: approximately £1,851
That is £1,851 in your bank account each month. Not the £2,333 you might have expected, but every deduction is there for a reason, and understanding them means you can budget accurately from month one.
What Happens When You Get a Pay Rise?
One of the most useful things you can do is run different salary scenarios through our salary calculator to see how a raise affects your take-home pay. It is not a one-to-one increase — some of the raise goes to tax and NI.
For example, if you get a £3,000 raise from £28,000 to £31,000, your take-home pay goes up by about £198 per month, not £250. The difference goes to additional income tax (20%) and NI (8%).
If you are offered overtime or thinking about picking up a side job, our overtime calculator can show how extra hours or a second income source will be taxed.
Share This With Your Friends
If you found this useful, chances are your friends are in the same boat. Every graduate goes through this moment of payslip confusion. Send them this article or share the salary calculator link — it takes thirty seconds to run and it makes the whole thing click.
Because once you understand your payslip, you understand your money. And once you understand your money, you can start making it work harder for you.