Key takeaways

  • In 2026/27 an employee on £3,000 a month with tax code 1257L in England pays about £390.50 Income Tax and £156.16 employee National Insurance each month.
  • Employer NI is 15% on pay above the secondary threshold of £417 a month (£5,000 a year), which is £387.45 a month on a £3,000 salary.
  • Employee NI is 8% between £1,048 and £4,189 a month and 2% above, in 2026/27.
  • Plan 2 student loan deductions are 9% of pay above £2,448.75 a month (£29,385 a year).
  • Auto-enrolment minimums are 5% employee and 3% employer on qualifying earnings between £6,240 and £50,270 a year, frozen for 2026/27.
  • On a £3,000 monthly salary the employer pays HMRC £983.11 and the total cost of employing the person is £3,461.85 a month, before any Employment Allowance.
  • Payroll deductions must be paid to HMRC by the 22nd of the following tax month electronically, or the 19th by post.

To calculate payroll taxes, work out Income Tax from the employee’s tax code, then employee and employer National Insurance from the Class 1 thresholds, then any student loan and pension deductions. This page works through one monthly payslip using HMRC’s 2026/27 rates and thresholds for employers, last updated 1 September 2026. Payroll software does these sums for you, but knowing them lets you check its output.

The example employee

Our employee earns £36,000 a year, paid monthly at £3,000. They live in England, have tax code 1257L, repay a Plan 2 student loan and are in a relief at source workplace pension at the legal minimum.

The 2026/27 figures you need

HMRC publishes every payroll threshold for the tax year from 6 April 2026 to 5 April 2027. These are the monthly figures used below.

ItemMonthly figureRate
Personal Allowance (1257L)£1,048 (£12,570 a year)0%
Basic rate bandNext £37,700 a year20%
Employee NI primary threshold£1,0488% to £4,189, then 2%
Employer NI secondary threshold£41715%
Plan 2 student loan threshold£2,448.759%
Pension qualifying earnings£520 to £4,1895% employee, 3% employer

Step by step: one month’s payroll

Each step answers one question your payroll software asks. Follow them in order.

  1. Income Tax. Annual taxable pay is £36,000 minus £12,570, which is £23,430. At 20% that is £4,686 a year, or £390.50 a month.
  2. Employee NI. Pay above the primary threshold is £3,000 minus £1,048, which is £1,952. At 8% that is £156.16.
  3. Student loan. Pay above the Plan 2 threshold is £3,000 minus £2,448.75, which is £551.25. At 9% that is £49.61, shown as £49 because student loan amounts are reported in whole pounds.
  4. Pension, employee. Qualifying earnings are £3,000 minus £520, which is £2,480. The 5% contribution is £124. Under relief at source the employee pays £99.20 from net pay and the provider claims £24.80 basic rate relief from HMRC.
  5. Pension, employer. 3% of £2,480 is £74.40.
  6. Employer NI. Pay above the secondary threshold is £3,000 minus £417, which is £2,583. At 15% that is £387.45.

Real payroll software may show Income Tax a few pence different. Code 1257L gives a tax-free amount of £12,579 a year, and HMRC’s cumulative method spreads it across the year period by period.

The payslip and the employer’s bill

The employee takes home about £2,305 and the employer’s total cost is about £3,462. Here is how the money splits.

LineEmployeeEmployer
Gross pay£3,000.00£3,000.00
Income Tax£390.50
Employee NI£156.16
Student loan£49.00
Pension£99.20£74.40
Employer NI£387.45
Net pay / total cost£2,305.14£3,461.85

The employer sends £983.11 to HMRC: the tax, both lots of NI and the student loan. The pension provider receives £173.60 from payroll, plus the £24.80 tax relief it claims. Use our employer cost calculator to run other salaries.

What changes the answer?

Several facts about the employee change the numbers. Check each one before you run payroll.

  • If the employee lives in Scotland, Scottish rates apply: 19%, 20% and 21% up to £31,092 of taxable income. On our example that is about £392.59 a month instead of £390.50.
  • If the tax code is not 1257L, the tax-free amount changes. See tax codes explained.
  • If pay goes above £4,189 a month, employee NI drops to 2% on the excess.
  • If the pension uses a net pay arrangement, the 5% comes off before tax, so Income Tax falls and the employee pays the full £124.
  • If the employee is under 21 or an apprentice under 25, employer NI is 0% up to £4,189 a month.
  • If you can claim Employment Allowance, up to £10,500 a year comes off your employer NI. See the Employment Allowance guide.

Reporting and paying HMRC

You report every payment to HMRC in a Full Payment Submission on or before payday, according to GOV.UK’s running payroll guidance. You then pay what you owe by the 22nd of the next tax month if you pay electronically, or the 19th by post. Tax months run from the 6th of one month to the 5th of the next.

Send an Employer Payment Summary by the 19th to claim Employment Allowance or statutory pay recovery, or if you paid nobody that month. Our payroll process steps guide covers the full monthly cycle.

What to do now

  1. Check your software is set to 2026/27 thresholds.
  2. Confirm each employee’s tax code, student loan plan and pension type.
  3. Re-run one payslip by hand using the steps above and compare it with the software.
  4. Diary the 22nd each month for payment to HMRC.

Frequently asked questions

How much employer NI do I pay on a £3,000 monthly salary?

In 2026/27 you pay 15% on pay above £417 a month, which is £387.45. Employment Allowance can reduce the bill if you are eligible.

What is the employee NI rate for 2026/27?

Employees pay 8% on earnings between £1,048 and £4,189 a month, and 2% on earnings above £4,189 a month.

How are student loan deductions calculated?

Take pay above the plan threshold for the pay period and multiply by 9% (6% for a postgraduate loan). The Plan 2 threshold is £29,385 a year in 2026/27.

What are the minimum auto-enrolment pension contributions?

The legal minimum is 8% of qualifying earnings, with at least 3% from the employer. Qualifying earnings are between £6,240 and £50,270 a year for 2026/27.

When do I pay PAYE to HMRC?

By the 22nd of the next tax month if you pay electronically, or by the 19th if you pay by cheque through the post.

Sources

Rates, thresholds and rules in this guide were checked against HMRC and GOV.UK guidance on 6 November 2026. Tax rules change, so check the current position on GOV.UK or with a qualified adviser before acting. This guide is general information, not personal advice.