Have you ever looked at your pay slip at the end of the month and been confused by all of the deductions that are taken away from you before you actually see any of your hard-earned cash? (And if you’re like me, you’re probably annoyed at how many of those deductions are down to tax as well...)
A UK pay slip typically includes a variety of information and figures that provide a breakdown of your earnings, deductions, and other financial details.
Here's a list of typical figures shown on a UK pay slip and what they mean:
Gross Pay
This is your total earnings before any deductions are taken out. It includes your basic salary and any additional payments like overtime, bonuses or commission.
Basic Salary
The fixed amount you're paid for your regular working hours.
Taxable Pay
This is the amount of your earnings that are subject to income tax. It's your gross pay minus any tax-free allowances such as pension contributions. Being an employee is the most tax inefficient way to earn money. You’ll generally pay more tax as an employee than you would as a business owner, for example (more on that and what to do about it in future articles…)
Note: if you increase your pension contributions, your taxable pay will decrease because pension contributions are taken before your taxable pay is calculated.
National Insurance (NI) Contributions
The amount deducted for National Insurance, which funds state benefits and pensions. There are different classes of National Insurance contributions that have varying rates.
Note: if you increase your pension contributions, the amount of National Insurance tax you have to pay will also decrease because this is calculated based on your taxable pay.
Income Tax
The amount deducted for income tax, which goes to fund public services and government programs. The rate depends on your total taxable pay and your tax code.
Note: if you increase your pension contributions, the amount of income tax you have to pay will also decrease because this is calculated based on your taxable pay.
Pension Contributions If you're enrolled in a workplace pension scheme, this figure represents the amount deducted from your gross pay and contributed to your pension fund.
Make sure you know the details of the workplace pension scheme you’re enrolled in: who the provider is, what fund you’re invested in, what percentage contribution you’re making, what percentage contribution your employer is making, what your options are for increasing or decreasing your payments and what your options are for transferring into and out of your pension scheme to other providers.
The current maximum pension contribution you can make in any tax year is £60.000 - this includes your contributions plus any contributions made by your employer.
Note: if you earn less than £60.000, the maximum you can contribute is the same amount as your earnings e.g. if you earn £30,000 in a tax year the maximum amount you can put into a pension in the same tax year is also £30,000.
Student Loan Repayments
If you have a student loan, this deduction represents the repayment of your loan and is based on your income.
Other Deductions
This can include things like union membership fees, healthcare contributions, or any other agreed-upon deductions such as County Court Judgement repayments if the beneficiary has an attachment to earnings to reclaim money owed.
Net Pay
Also known as take-home pay, this is the amount you'll actually receive in your bank account after all deductions have been taken out from your gross pay.
Tax Code
A code used by HMRC to determine how much income tax should be deducted from your pay. It takes into account your personal allowances and any other factors.
Pay Period
Indicates the time period for which the pay slip is generated, usually a month or a specific pay period.
Employer information
This will include information such as your employer’s name and address.
Your personal information
This will include your name and address, your employee number (a unique identifier assigned to you by your employer), your national insurance number and your payroll number (a reference number used by your employer for administrative purposes)
Hours Worked
The number of hours you worked during the pay period.
Overtime
Any additional hours worked beyond your regular working hours, often with a separate pay rate.
Bonus or Commission
Any additional payments you've received, usually not part of your regular salary.
Year-to-Date Figures
A summary of your earnings and deductions for the current tax year up to the current pay period.
It's important to review your pay slip regularly to ensure that all the information is accurate and that you're being paid correctly. If you have any concerns about the figures on your pay slip, it's recommended to discuss them with your employer's HR or payroll department.
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