Eastbourne Citizens Advice Bureau

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Eastbourne Citizens Advice Bureau Financial
Literacy
WAGES
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• In this unit we will look at
• a standard wage slip
• Tax
• National Insurance
• P45 and P60
• The National Minimum wage

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This is a typical layout for a payslip
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Here we see the employers name and your name.
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This is your national insurance number
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WHAT IS NATIONAL INSURANCE? National Insurance
contributions are payments which most people make
towards the National Health Service and to enable
them to get entitlement to some social security
benefits and state pension. For employed
earners, contributions are paid as a percentage
of income above a certain level. Self-employed
people pay a set weekly rate and, if their
profits are high enough, a percentage of their
income. Someone who is unemployed or unable
towork through sickness may have contributions
credited.
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The Inland Revenue and Department for Work and
Pensions (DWP) use your national insurance number
(NINO) to identify your contribution and benefit
record. The number always consists of two
letters, six numbers and a letter, for example,
AB 123456 C. National Insurance is currently
12, but it doesn't start until you earn at least
149 a week.11
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This is your Tax Code
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• Income Tax
• Income Tax is money deducted from your earnings
  which is paid to the government. The government
  department in charge of collecting tax is the
  Inland Revenue.
• If you work for an employer your tax and National
  Insurance will be paid automatically. It comes
  straight out of your wages before you receive
  them. This is known as Pay As You Earn (PAYE).
• Everybody can earn a certain amount (known as the
  Personal Allowance) before they start paying tax
  or National Insurance. From April 2013 the
  personal allowance is 9,440. This figure changes
  yearly.
• Normally you pay
• 20 on anything you earn between 9,440 and
  32,010)
• 40 on anything between 32,011 and 150,000 and
  
• 45 on anything over 150,000

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The number in the tax code is usually three
figures. It represents the total of all available
allowances, minus any amount to be deducted to
cover other income or benefits, and with the last
digit removed. The allowance as shown by the
number in the tax code is then rounded up. The
letter indicates what kind of tax code it is. In
this example L means the Basic Tax
allowance. For example, if your total income is
9,992, of which 9440 is not taxable, your code
is 944L.    
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The payment method is BACS BACS stands for
Bankers Automated Clearing System. BACS is an
automated service operated by banks and building
societies. It means the money is transferred
directly from the companys account into the
employees bank account.You may also be paid by
cash or cheque.
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There are two entries, one for basic and one
for overtime
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Add together the 2 rates of pay giving a total of
934.11 This is subject to tax and National
Insurance deductions. Total pay is also known as
Gross Pay
xxxxxxx
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The amount of tax deducted is spread out across
the year. The Deductions column shows the
amounts of Tax and National Insurance. The total
Deductions is shown here
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Any other deductions which are taken from your
wages at source such as union subscriptions,
student loan repayments and private pension
schemes will be shown in this column.
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So, total pay minus total deductions gives the
amount you receive in wages. 934.11-63.77
870.34 This is known as NET pay
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• Here we see the total figures paid this year.
• It shows
• Total pay (gross)
• How much of that is taxable
• The total tax paid
• Total National Insurance paid by the employer
  and by the employee

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Any payments made to a pension scheme either by
the employer or employee would be shown here.
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When you leave a job or you are dismissed you
should receive a P45 from your employerP45
shows the amount that you have earned and how
much tax you have paid this year. You will need
this form to give to your next employer or to
claim benefits.
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A P60 details your earnings and tax deductions
for the current tax year and is provided by your
employer. The law requires you to keep a record
of your taxable income for at least 22 months
after the end of the current tax year so make
sure you keep it in a safe place as duplicates
are not always easy to get. Self-employed
people must keep records for up to six years
after the relevant tax year.
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National minimum wage (NMW) Workers in the UK
aged 16 (and above school leaving age) or over
are now legally entitled to a national minimum
hourly wage, regardless of where they work, the
size of the firm or the workers occupation.
This includes casual labourers, agency workers,
homeworkers, workers on short-term contracts and
workers employed by subcontractors. Before
October 2004, workers aged between 16 and 17 were
not entitled to the national minimum wage.
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• There are some workers who are not covered by the
  national minimum wage. These are-
• workers aged under 16
• some apprentices
• some people living and working within a family
  such as nannies and au pairs, where they work
  and they share meals with the family and they do
  not have to pay towards their accommodation
  costs or meals
• self-employed people

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• Workers who are not covered by the national
  minimum wage (continued) workers aged under 16
• members of the armed forces
• share fisherman
• prisoners
• voluntary workers
• some trainees on government schemes.
• workers who are homeless or living in a hostel,
  who are entitled to income support/income
  based jobseekers allowance and who are taking
  part in a scheme run by a charity which
  provides them with work
• residential members of religious communities.

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How much is the NMWFor most workers aged 21 and
over, the standard hourly rate of the NMW is
listed below. Workers aged between 18 and 20 or
apprentices are only entitled to be paid at a
lower rate.
Workers aged 16-17 3.68
Workers aged 21 and over 6.19
Workers aged between 18 - 20 - reduced rate NMW 4.98
Apprentices under 19 or 19 and over in the first year of apprenticeship 2.65
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National Minimum Wage Helpline If you want to
find out if you are eligible to claim the NMW you
can contact the If you think you are
entitled to the NMW but your employer is not
paying it to you If you think you are entitled to
the national minimum wage and are not receiving
it you should contact the NMW helpline (see
above) or seek the help of an experienced
adviser, for example, at a Citizens Advice
Bureau.
Pay and Work Rights Helpline on Tel [phone]
2368 Or visit the website at www.gov.uk.