PAYE (Pay As You Earn) is the UK system by which employers deduct income tax and National Insurance contributions directly from employees' wages before paying them. HMRC uses your tax code to tell your employer how much tax-free income you are entitled to, and your employer deducts the right amount of tax each pay period. Most employed people in the UK pay tax through PAYE.

What is the PAYE threshold 2025/26?

For 2025/26, the PAYE threshold (Personal Allowance) is £12,570 per year (£1,047.50/month, £241.73/week). You do not pay income tax on earnings below this amount. The threshold for National Insurance is also £12,570 (Primary Threshold). You pay 8% NI on earnings between £12,570 and £50,270, and 2% above that.

What is cumulative PAYE vs week 1/month 1 basis?

Cumulative PAYE (the standard method) calculates your tax based on total earnings and allowances used since the start of the tax year, ensuring you pay the right total tax across the whole year — including auto-refunds if you overpaid earlier. Week 1/Month 1 basis (non-cumulative, indicated by W1 or M1 after your tax code) calculates tax fresh each pay period without reference to previous periods. W1/M1 is used when starting a new job without a P45, on emergency codes, or when HMRC instructs it.

PAYE Calculator UK 2025/26

Calculate your Pay As You Earn income tax, National Insurance and net take-home pay. Supports all tax codes and Scottish rates.

Last reviewed: February 2026 by Mustafa Bilgic, UK Tax Specialist

PAYE Calculator 2025/26

Enter your gross salary and details to calculate PAYE deductions

Annual Gross Salary (£)

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Based on HMRC 2025/26 rates. For guidance only.

Enter your salary and click Calculate PAYE to see your payslip breakdown

What is PAYE (Pay As You Earn)?

PAYE — Pay As You Earn — is the system HM Revenue & Customs (HMRC) uses to collect Income Tax and National Insurance contributions (NICs) from employees in the United Kingdom. Rather than paying a lump-sum tax bill at the end of the year, employees have deductions taken directly from each payslip by their employer, who then pays HMRC on their behalf.

Introduced in 1944, PAYE is the primary method by which the UK government collects the vast majority of income tax. Approximately 84% of all UK income tax is collected via PAYE. If you are employed — as opposed to self-employed — you will almost certainly pay tax through PAYE.

Your employer uses your tax code (issued by HMRC) to determine how much of your pay is tax-free and how much tax to deduct at each pay period. The most common tax code for 2025/26 is 1257L, which gives you a tax-free personal allowance of £12,570 for the year.

How PAYE Works in Practice

HMRC issues your tax code — based on your circumstances (personal allowance, benefits in kind, previous underpayments etc.)
Your employer receives the code — either via the P6/P9 tax code notice, or the employee provides a P45 from a previous job
Tax is deducted each pay period — using cumulative (standard) or week 1/month 1 (non-cumulative) basis
Employer pays HMRC — on a monthly or quarterly basis, submitting a Full Payment Submission (FPS) via RTI (Real Time Information)
Reconciliation at year end — HMRC issues P800 letters if you have paid too much or too little

PAYE Tax Codes Explained 2025/26

Your PAYE tax code is a combination of numbers and letters that tells your employer how much tax-free income to apply to your pay. Here is a comprehensive guide to the most common codes:

Tax Code	What It Means	Personal Allowance	Who Gets It
1257L	Standard personal allowance. Most common code.	£12,570	Most employees with one job, no untaxed income or taxable benefits
1100L	Reduced personal allowance	£11,000	Employees with some taxable benefits or untaxed income up to £1,570
1000L	Further reduced personal allowance	£10,000	Employees with larger taxable benefits or untaxed income reducing the allowance
BR	Basic Rate — all income taxed at 20%	£0	Second jobs (personal allowance used on main job); emergency tax situations
D0	Higher Rate — all income taxed at 40%	£0	Second job where all income is in the higher rate band
D1	Additional Rate — all income taxed at 45%	£0	Second or third job where all income falls in the additional rate band
NT	No Tax — no tax deducted	Unlimited	Non-UK tax residents, certain pension/lump sum payments, HMRC agreement
K100	K code — adds £1,000 to taxable income	Negative (−£1,000)	Employees with untaxed income or benefits exceeding personal allowance (e.g. company car, state pension)
K200	K code — adds £2,000 to taxable income	Negative (−£2,000)	Higher untaxed income/benefits, common with larger company car benefits
S1257L	Scottish standard (S prefix = Scottish taxpayer)	£12,570	Scottish residents with standard allowance — Scottish income tax rates apply
C1257L	Welsh standard (C prefix = Cymru/Wales)	£12,570	Welsh residents — same rates as England for 2025/26
M / N	Marriage Allowance transfer	£13,830 (M) / £11,310 (N)	M = receiving allowance transfer from spouse; N = transferring allowance to spouse
T	Tax code requires review by HMRC	Varies	Complex tax affairs requiring individual calculation
W1 / M1	Week 1 or Month 1 — non-cumulative basis	Standard PA	Emergency code, new starters without P45, code change situations — no carry-forward of unused allowances
0T	Zero allowance, all bands applied	£0	No P45, new starters, allowance transferred entirely to spouse

How to decode your tax code: For L codes (e.g. 1257L), multiply the number by 10 to get your annual tax-free allowance. 1257 × 10 = £12,570. For K codes, the number represents the amount ADDED to your income before tax. K100 means £1,000 is added to your gross pay each year before tax is calculated.

Year-to-Date PAYE Schedule

PAYE operates on a cumulative basis throughout the tax year. The table below shows how your deductions accumulate month by month. Calculate your salary above first to see your personalised schedule.

Use the calculator above to generate your year-to-date PAYE schedule

The cumulative PAYE method ensures that if you have unused personal allowance from earlier months (e.g. due to starting work mid-year or a period of lower earnings), this is automatically taken into account in later pay periods, potentially resulting in a tax refund through your payslip.

How PAYE Is Calculated: Step-by-Step (Worked Example £35,000)

Let us walk through the exact PAYE calculation for a UK employee earning £35,000 gross per year in 2025/26, with tax code 1257L, no student loan, and no pension contributions.

Step 1: Identify the Personal Allowance from tax code
Tax code 1257L → Personal Allowance = 1257 × £10 = £12,570

Step 2: Calculate Taxable Income
£35,000 (gross) − £12,570 (personal allowance) = £22,430 taxable income

Step 3: Apply Income Tax Bands
All £22,430 falls within the Basic Rate band (£0–£37,700 above personal allowance)
Income Tax = £22,430 × 20% = £4,486.00

Step 4: Calculate National Insurance
NI is charged on earnings between £12,570 and £50,270 = £22,430 at 8%
National Insurance = £22,430 × 8% = £1,794.40

Step 5: Calculate Take-Home Pay
£35,000 − £4,486 − £1,794.40 = £28,719.60 per year (£2,393.30/month)

Gross Annual Salary	£35,000.00
Personal Allowance (tax-free, code 1257L)	−£12,570.00
Taxable Income	£22,430.00
Income Tax — Basic Rate 20% on £22,430	−£4,486.00
National Insurance — 8% on £22,430 (£12,570–£50,270)	−£1,794.40
Total Deductions	−£6,280.40
Annual Take-Home Pay	£28,719.60
Monthly Take-Home Pay	£2,393.30
Effective Income Tax Rate	12.82%
Effective Total Deduction Rate	17.94%

£60,000 Salary — Crossing into Higher Rate Tax

At £60,000, you pay both basic and higher rate income tax. The personal allowance remains £12,570 (income is below £100,000 so no taper applies).

Gross Annual Salary	£60,000.00
Personal Allowance	−£12,570.00
Taxable Income	£47,430.00
Basic Rate Tax 20% on £37,700 (£12,570–£50,270)	−£7,540.00
Higher Rate Tax 40% on £9,730 (£50,270–£60,000)	−£3,892.00
Total Income Tax	−£11,432.00
NI 8% on £37,700 (£12,570–£50,270)	−£3,016.00
NI 2% on £9,730 (£50,270–£60,000)	−£194.60
Total NI	−£3,210.60
Annual Take-Home	£45,357.40
Monthly Take-Home	£3,779.78
Effective Tax Rate	24.4%

Scottish PAYE Example: £40,000 Salary

Scottish taxpayers pay income tax at different rates. The same personal allowance of £12,570 applies, but the bands and rates differ from the rest of the UK.

Gross Annual Salary	£40,000.00
Scottish Personal Allowance	−£12,570.00
Taxable Income	£27,430.00
Starter Rate 19% on £2,827 (£12,570–£15,397)	−£537.13
Basic Rate 20% on £8,831 (£15,397–£24,228)	−£1,766.20
Intermediate Rate 21% on £15,772 (£24,228–£40,000)	−£3,312.12
Total Income Tax (Scotland)	−£5,615.45
NI 8% on £27,430 (£12,570–£40,000)	−£2,194.40
Annual Take-Home	£32,190.15
Monthly Take-Home	£2,682.51

Note: NI contributions are the same for Scotland as the rest of the UK — only income tax rates differ.

PAYE vs Self-Assessment: What Is the Difference?

Not everyone pays tax through PAYE. If you are self-employed, have complex tax affairs, or earn above certain thresholds from non-PAYE sources, you may need to complete a Self-Assessment tax return. Here is how the two systems compare:

💰 PAYE (Employed)

Tax deducted automatically from each payslip
Employer handles all calculations and payments to HMRC
No annual tax return required (in most cases)
Tax is spread evenly across the year
P60 issued at year end showing total tax paid
P45 issued when you leave a job
Automatic refunds if you overpay
Best for single-employer employees with straightforward income

📋 Self-Assessment (Self-Employed / Complex)

You calculate and pay your own tax
Two payments on account (January & July) + balancing payment
Annual Self-Assessment return (SA100) required
Must register with HMRC by 5 October
Can claim a wider range of expenses and deductions
Payments in advance based on prior year liability
Required if: self-employed, director, income >£100,000, untaxed income >£1,000
Class 2 and Class 4 NI rather than Class 1

You may need both PAYE and Self-Assessment if you are employed but also have a side income, rental income, or dividends. HMRC may ask you to file a return even if you pay tax through PAYE.

When to register for Self-Assessment: You must register by 5 October following the tax year in which you had untaxed income. For 2025/26 (ending 5 April 2026), register by 5 October 2026. Late registration penalties apply.

PAYE Calculator — Frequently Asked Questions

What is PAYE and how does it work? +

PAYE (Pay As You Earn) is the UK's system for collecting income tax and National Insurance directly from employees' wages. Your employer uses your HMRC-issued tax code to calculate the correct deductions each pay period and pays the tax directly to HMRC on your behalf via Real Time Information (RTI). You receive your net pay after these deductions have been made. Most UK employees never need to file a tax return because PAYE handles everything automatically.

How is PAYE calculated? +

PAYE is calculated by: (1) Taking your gross pay for the period, (2) Applying your tax code to determine the tax-free portion, (3) Calculating income tax on the remaining taxable pay at the applicable rates (20%, 40%, or 45%), (4) Calculating National Insurance at 8% on earnings between £12,570 and £50,270, and 2% above £50,270 per year, (5) Deducting student loan repayments if applicable. For cumulative PAYE, all calculations account for amounts already paid since the start of the tax year (6 April).

What does tax code 1257L mean? +

1257L is the standard UK tax code for 2025/26. The number 1257, multiplied by 10, gives your annual tax-free Personal Allowance of £12,570. The letter L means you qualify for the standard Personal Allowance with no adjustments. This is the code used by most employees who have one job, no taxable benefits, no underpaid tax from previous years, and no other untaxed income. If your circumstances change, HMRC may issue a new tax code.

How do I check if I am paying the right amount of PAYE? +

Use this PAYE calculator to estimate your correct deductions, then compare with your payslip. Also check your tax code is correct — it appears on your payslip and P60. You can view and manage your tax code by logging into your Personal Tax Account at gov.uk/personal-tax-account. If your tax code is wrong, contact HMRC. At year end, HMRC automatically checks your tax and may issue a P800 if you have over or underpaid.

What is the PAYE threshold for 2025/26? +

For 2025/26, the PAYE starting threshold (Personal Allowance) is £12,570 per year — equivalent to £1,047.50 per month or £241.73 per week. You pay no income tax below this level. The National Insurance Primary Threshold is also aligned at £12,570 per year. NI is charged at 8% on earnings between £12,570 and £50,270 (Upper Earnings Limit), and at 2% above £50,270. The higher rate income tax threshold is £50,270, and the additional rate applies above £125,140.

Can I get a PAYE refund? +

Yes. Common reasons for PAYE overpayment include: starting work part-way through the tax year, being put on an emergency tax code (0T, BR), leaving employment before year end, claiming tax relief on job expenses, or paying too much NI. Cumulative PAYE automatically adjusts within the same tax year, so you may get a refund through your payslip. After the tax year ends, HMRC may issue a P800 tax calculation — if it shows a refund, you can claim online, by post, or HMRC may send a cheque. You typically have 4 years to claim a PAYE refund.

How does PAYE work if I have two jobs? +

Your Personal Allowance (£12,570 for 2025/26) is normally allocated to your main (primary) job. Your second job will usually receive tax code BR, meaning all earnings from the second job are taxed at 20% from the first pound. If you already pay higher rate tax in your main job and your second job income would also fall in the higher rate, your second job may be given a D0 code (40%). You can ask HMRC to split your Personal Allowance between both jobs by contacting them or updating your Personal Tax Account.

What is the difference between cumulative PAYE and week 1 / month 1 basis? +

Cumulative PAYE (the standard method) calculates your tax by reference to your total earnings and total allowances from 6 April to the current date. It automatically carries forward any unused allowances from earlier pay periods, which can result in tax refunds directly through your payslip. Week 1 / Month 1 basis (shown as W1 or M1 after your code, e.g. 1257L W1) calculates each period independently without reference to the past. No unused allowances are carried forward. It is used in emergency situations, for new starters without a P45, or when HMRC instructs a non-cumulative code.

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Official Sources Used

UK Calculator Editorial Team

Our PAYE calculator is maintained by qualified UK tax specialists and financial analysts. All rates are sourced directly from HMRC and Revenue Scotland for the 2025/26 tax year. Learn more about our team.

Official Data Source: All calculations use 2025/26 rates from HMRC Income Tax Rates | National Insurance Rates | Revenue Scotland. Always verify with official sources for important financial decisions.