P60 Season: 5 Things Your Payslip Is Telling You About Your Finances

Your employer must issue your P60 by 31 May. It is a summary of everything you earned and every penny of tax you paid during the 2025/26 tax year. Most people glance at it and file it away. But this year, it is worth taking a closer look, because the numbers on that piece of paper might be telling you something important.

What is a P60, and why does it matter?

Your P60 shows your total pay, the income tax deducted, your National Insurance contributions, and your tax code. It is your official record of the tax year just gone, and you will need it if you ever need to check your tax position, apply for a mortgage, or claim a tax refund.

More importantly, it is the simplest way to spot whether you are paying more tax than you expected.

1. You might be a higher-rate taxpayer without realising it

The higher-rate tax threshold has been frozen at £50,270 since 2021, and it will remain there until at least 2028. Meanwhile, wages across the UK have continued to rise. The result is what is known as "fiscal drag" - a quiet, incremental shift that pulls more people into the 40% tax band without any headline rate change.

If you were earning £47,000 or £48,000 a few years ago and have had modest annual pay rises since, there is a good chance you have now crossed the £50,270 threshold. Your P60 will confirm this. Look at your total taxable pay and compare it to previous years.

The Office for Budget Responsibility estimates that the frozen thresholds will pull around 3 million additional people into the higher-rate band by the time the freeze ends. You may well be one of them.

2. Your tax code might be wrong

Your tax code determines how much tax-free income you are entitled to. The standard code for 2025/26 was 1257L, reflecting the £12,570 personal allowance. But tax codes can be wrong, and HMRC does not always get it right.

Common reasons for an incorrect tax code include having two jobs, receiving a company benefit like a car or private medical insurance, or having an outstanding tax debt from a previous year that HMRC is collecting through your code.

If the code on your P60 does not look right, log in to your HMRC personal tax account and check. An incorrect tax code could mean you have been overpaying or underpaying tax all year.

3. Your pension contributions could be saving you more than you think

If you are making pension contributions through your employer, your P60 will show your taxable pay after those contributions have been deducted (if you are on a salary sacrifice arrangement). This is worth understanding, because pension contributions are one of the most effective ways to reduce your income tax bill.

For higher-rate taxpayers, every £1,000 contributed to a pension effectively costs just £600, because you receive 40% tax relief. If your P60 shows that you have just crept over the £50,270 threshold, increasing your pension contributions could bring you back into the basic-rate band and save you a meaningful amount of tax.

4. You might be losing your personal allowance

If your P60 shows total income above £100,000, you are in a particularly painful part of the tax system. For every £2 you earn above £100,000, your personal allowance is reduced by £1, until it disappears entirely at £125,140. This creates an effective marginal tax rate of around 60% on income between £100,000 and £125,140.

If you are in or approaching this bracket, pension contributions can be especially valuable. Contributing enough to bring your adjusted net income below £100,000 restores your full personal allowance, which can save you thousands.

5. Your dividend income is being taxed more heavily

If you are a company director taking a mix of salary and dividends, your P60 will only show the salary side. But it is worth remembering that from April 2026, dividend tax rates have increased by 2 percentage points across all bands, and the tax-free dividend allowance remains at just £500.

This makes it more important than ever to review how you take income from your business, and whether your current salary and dividend split is still the most tax-efficient option.

What should you do next?

When your P60 arrives, do not just file it. Spend five minutes checking the numbers against your expectations. If anything looks wrong, check your tax code through your HMRC personal tax account. And if you have been pulled into a higher tax band or you want to explore ways to reduce your tax bill, a conversation with an independent financial adviser can help.

At Cummins Financial Advisers, we help individuals and families across Chester and Wrexham understand their tax position and make their money work harder. Whether it is reviewing your pension contributions, optimising your salary and dividend mix, or simply making sense of the numbers, we are here to help.

Get in touch to check your tax position. Call us on 01244 571050 or contact us here.

The Financial Conduct Authority does not regulate taxation advice. The information in this article is for general guidance only and does not constitute personal financial or tax advice. You should seek independent professional advice based on your individual circumstances.