Understanding a payslip

1
Understanding a payslip
2
Starter question

• You are a supermarket team leader earning an
  annual salary of 15,000.
• How much do you take home each month?
• More than 1,250?
• Exactly 1,250?
• Less than 1,250?

3
National insurance (N.I.)
DATE DATE EMPLOYER EMPLOYER EMPLOYEE EMPLOYEE
31/05/2010 31/05/2010 The Supermarket Ltd. The Supermarket Ltd. Your  name here Your  name here
DEPARTMENT DEPARTMENT N.I. NUMBER TAX CODE PAY METHOD PERIOD
Retail Retail EB-92-31-56-B 647L BACS Month 2
DESCRIPTION DESCRIPTION UNITS DUE DEDUCTIONS TOTALS TO DATE TOTALS TO DATE
Basic Pay Basic Pay Tax 142.02 N.I. 85.14 Total Gross Pay Taxable Pay Tax Paid Employee NI Employer NIEmployee Pension Employer Pension 2500.00 2500.00 284.04 170.28 198.14 0.00 0.00
HOURS GROSS PAY DEDUCTIONS NET PAY
Standard 37.5hrs per week 1250.00 227.16 1022.84
What is this?
4
National Insurance

• Everyone receives their National Insurance number
  just before their 16th birthday. It will stay
  with you for life.
• Most people who work have to pay National
  Insurance Contributions, unless they are one of
  the groups who are exempt from the system.
• National Insurance is paid at 11 of your
  salary.
• By paying National Insurance you are paying for
  benefits (including the jobseekers allowance,
  Incapacity benefit, a Widows Pension, and
  Maternity allowance) and the state retirement
  pension.

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Tax code
DATE DATE EMPLOYER EMPLOYER EMPLOYEE EMPLOYEE
31/05/2010 31/05/2010 The Supermarket Ltd. The Supermarket Ltd. Your  name here Your  name here
DEPARTMENT DEPARTMENT N.I. NUMBER TAX CODE PAY METHOD PERIOD
Retail Retail EB-92-31-56-B 647L BACS Month 2
DESCRIPTION DESCRIPTION UNITS DUE DEDUCTIONS TOTALS TO DATE TOTALS TO DATE
Basic Pay Basic Pay Tax 142.02 N.I. 85.14 Total Gross Pay Taxable Pay Tax Paid Employee NI Employer NIEmployee Pension Employer Pension 2500.00 2500.00 284.04 170.28 198.14 0.00 0.00
HOURS GROSS PAY DEDUCTIONS NET PAY
Standard 37.5hrs per week 1250.00 227.16 1022.84
What is this?
6
Tax Code

• Your Tax Code will show how much income you are
  allowed to earn before you start to pay tax.
• It is the first 3 numbers of your tax allowance
  followed by a letter. Most people have the letter
  L which indicates that they have the basic tax
  allowance.
• So 647L means this person can earn 6,470 before
  they start to pay tax.

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bacs
DATE DATE EMPLOYER EMPLOYER EMPLOYEE EMPLOYEE
31/05/2010 31/05/2010 The Supermarket Ltd. The Supermarket Ltd. Your  name here Your  name here
DEPARTMENT DEPARTMENT N.I. NUMBER TAX CODE PAY METHOD PERIOD
Retail Retail EB-92-31-56-B 647L BACS Month 2
DESCRIPTION DESCRIPTION UNITS DUE DEDUCTIONS TOTALS TO DATE TOTALS TO DATE
Basic Pay Basic Pay Tax 142.02 N.I. 85.14 Total Gross Pay Taxable Pay Tax Paid Employee NI Employer NIEmployee Pension Employer Pension 2500.00 2500.00 284.04 170.28 198.14 0.00 0.00
HOURS GROSS PAY DEDUCTIONS NET PAY
Standard 37.5hrs per week 1250.00 227.16 1022.84
What is this?
8
Bacs

• BACS is the Bankers Automated Clearing System.
• If you are paid by BACS it means your pay goes
  straight into your own bank account.
• It means you do not have to carry large sums of
  money around on pay day.

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deductions
DATE DATE EMPLOYER EMPLOYER EMPLOYEE EMPLOYEE
31/05/2010 31/05/2010 The Supermarket Ltd. The Supermarket Ltd. Your  name here Your  name here
DEPARTMENT DEPARTMENT N.I. NUMBER TAX CODE PAY METHOD PERIOD
Retail Retail EB-92-31-56-B 647L BACS Month 2
DESCRIPTION DESCRIPTION UNITS DUE DEDUCTIONS TOTALS TO DATE TOTALS TO DATE
Basic Pay Basic Pay Tax 142.02 N.I. 85.14 Total Gross Pay Taxable Pay Tax Paid Employee NI Employer NIEmployee Pension Employer Pension 2500.00 2500.00 284.04 170.28 198.14 0.00 0.00
HOURS GROSS PAY DEDUCTIONS NET PAY
Standard 37.5hrs per week 1250.00 227.16 1022.84
What is this?
10
Deductions

• Both National Insurance and Tax are deducted from
  your pay. These are called compulsory deductions
  because you must pay them.
• The tax that is taken off is called income tax.
• Everyone is allowed to earn some money before
  they start to pay income tax this is your tax
  allowance. For most people it is 6,470 per year
  (per annum).
• Once your income goes above this allowance you
  will have approximately 20 pence of every pound
  you earn taken as income tax.
• So when income tax is added to National Insurance
  you can expect to lose 30 of your income in
  deductions.

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Gross pay
DATE DATE EMPLOYER EMPLOYER EMPLOYEE EMPLOYEE
31/05/2010 31/05/2010 The Supermarket Ltd. The Supermarket Ltd. Your name here Your name here
DEPARTMENT DEPARTMENT N.I. NUMBER TAX CODE PAY METHOD PERIOD
Retail Retail EB-92-31-56-B 647L BACS Month 2
DESCRIPTION DESCRIPTION UNITS DUE DEDUCTIONS TOTALS TO DATE TOTALS TO DATE
Basic Pay Basic Pay Tax 142.02 N.I. 85.14 Total Gross Pay Taxable Pay Tax Paid Employee NI Employer NIEmployee Pension Employer Pension 2500.00 2500.00 284.04 170.28 198.14 0.00 0.00
HOURS GROSS PAY DEDUCTIONS NET PAY
Standard 37.5hrs per week 1250.00 227.16 1022.84
What is this?
12
Gross Pay

• The total income that you receive before any
  deductions are made is called your Gross Pay.
• Gross pay will be bigger than Net Pay.

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Net pay
DATE DATE EMPLOYER EMPLOYER EMPLOYEE EMPLOYEE
31/05/2010 31/05/2010 The Supermarket Ltd. The Supermarket Ltd. Your  name here Your  name here
DEPARTMENT DEPARTMENT N.I. NUMBER TAX CODE PAY METHOD PERIOD
Retail Retail EB-92-31-56-B 647L BACS Month 2
DESCRIPTION DESCRIPTION UNITS DUE DEDUCTIONS TOTALS TO DATE TOTALS TO DATE
Basic Pay Basic Pay Tax 142.02 N.I. 85.14 Total Gross Pay Taxable Pay Tax Paid Employee NI Employer NIEmployee Pension Employer Pension 2500.00 2500.00 284.04 170.28 198.14 0.00 0.00
HOURS GROSS PAY DEDUCTIONS NET PAY
Standard 37.5hrs per week 1250.00 227.16 1022.84
What is this?
14
Net Pay

• This is the pay you have left after your
  deductions have been removed.
• It is sometimes called your take home pay.
• All the deductions are made by the Tax offices,
  so you dont have to do anything about it, except
  be honest about how much income you earn.
• This system is called Pay As You Earn (PAYE).

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totals
DATE DATE EMPLOYER EMPLOYER EMPLOYEE EMPLOYEE
31/05/2010 31/05/2010 The Supermarket Ltd. The Supermarket Ltd. Your  name here Your  name here
DEPARTMENT DEPARTMENT N.I. NUMBER TAX CODE PAY METHOD PERIOD
Retail Retail EB-92-31-56-B 647L BACS Month 2
DESCRIPTION DESCRIPTION UNITS DUE DEDUCTIONS TOTALS TO DATE TOTALS TO DATE
Basic Pay Basic Pay Tax 142.02 N.I. 85.14 Total Gross Pay Taxable Pay Tax Paid Employee NI Employer NIEmployee Pension Employer Pension 2500.00 2500.00 284.04 170.28 198.14 0.00 0.00
HOURS GROSS PAY DEDUCTIONS NET PAY
Standard 37.5hrs per week 1250.00 227.16 1022.84
What is this?
16
Total Deductions

• This sums up all the deductions from your pay so
  far in the tax year (April to March). If you were
  to leave the business who paid you, then you
  should receive a P45. This would contain
• Your leaving date
• How much tax you have paid so far in this tax
  year
• How much pay you had earned so far in this tax
  year.
• The tax year runs from April to March. So this
  payslip for August is month 5. At the end of the
  tax year your employer should give you a P60
  which will tell you
• The total amount of tax you have paid in this tax
  year
• The total amount of pay you have earned in this
  tax year.

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Total Deductions

• Some people will choose to have other payments
  deducted from their pay these are called
  voluntary deductions.
• E.g. Most people contribute to a pension scheme
  (a different one to the state pension that you
  qualify for by paying National Insurance
  payments). These contributions are taken from
  your gross pay and invested to build up a pension
  fund for you. When you retire, this fund will be
  used to provide you with a retirement income
  (known as pension or annuity). Another type of
  voluntary deduction is when you choose to join a
  Trade Union and pay their fees every month from
  your payslip.