Explaining your payslip
Getting your first payslip is always exciting. It feels good to be paid for the work you have been doing. But what do all the little bits mean and why are you being taxed that specific amount? Find out everything you need to know.
You payslip contains a lot of information and all companies are slightly different. The main things it will contain are your income, tax, National Insurance (NI), and other deductions. It should also have a running total of your earning for the financial year, tax and NI. It will also show the period of time the payslip is for. This could be the previous month, fortnight or week depending on how you are paid.
This is the amount(s) of money taken from your pay. This can be for tax, NI, pensions, student loans, other loans, car allowance plus many more. Sometimes, holiday and sick pay will also appear here.
This is how your employer pays you. It is normally done by BACS, and automated system used to move money into bank accounts.
Gross and Net pay
You will get both Gross and Net pay figures on your payslip. The Gross pay is the money you have earned before deductions of tax and NI etc. The net pay is what will appear in your bank account after deductions.
The tax code is very important and quite complicated. Almost every person in the UK has to pay tax, if you are not sure, you probably do. If you do have to pay tax, then the Government gives you a tax-free allowance. This allowance gives you the right to earn a certain amount of money before you pay tax on it. In 2017 the majority of people are on the tax code ‘1150L’.
If you add another 0 to the end of the tax code it tells you how much money you can earn before you pay tax. In the case of ‘1150L’ it gives £11,500 tax-free. ‘L’ is the most common letter shown in a tax code. It is ‘standard’ tax. Others include; S (for Scotish rates), BR, T, N, M, NT and more.
Although it’s unlikely on your first payslip another common tax code is ‘K’. This appears at the beginning of the tax code e.g. K250. A ‘K’ code is used when you have income that isn’t being taxed in another way, or your employee benefits are higher than the tax-free allowance. For example, if you have a company car, as this is a benefit you need to pay tax on its value or the payment value as if you were paying for it yourself.
Filing your payslips
Filing your payslips is really important. A lot of companies are now moving to emailed payslips but the reasoning is the same. You should keep them for as long as possible and in the order you get them for easy sorting later.
As we have discussed there is a lot of information on your payslip and you don’t want just anyone finding it and using it against you, or spreading it around. They will also contain your National Insurance number which could be used in identity fraud. Keeping payslips is also really good for record keeping. If you ever need to check old details it’s great to have them around, especially if you want to take out a loan for example.
If you have questions about your payslip your first port-of-call should be your company’s Payroll or HR department, whoever looks after the payroll. They should be able to go through anything with you.
Checking your tax and NI is always a good idea, maybe not every month but when you start a job, get a pay rise or commission etc. A great and simple online checker is thesalarycalculator.co.uk. If you put in your salary details, tax code and any other information it needs (loans, age, pension etc) it will break down everything for you and it’s completely anonymous too.