Understanding your payslip can be a confusing task, especially when you’re receiving pay rises that take you into a new tax bracket. By carefully keeping track of the money that you have coming into your bank account, you’ll be able to notice any sudden changes to your income, whether you’re being overpaid, underpaid or being subjected to identity theft.
Account statements are great ways of keeping a close eye on your finances, and some banks even provide email and text updates as soon as any money comes into or leaves your account. Understanding your payslip however is the most efficient way to see how much tax, national insurance and pension contributions you’re paying, as well as identifying your tax code. There are a number of other pieces of information that a pay slip should always show:
First thing’s first – your full name and home address will be shown in your payslip. Even if you are on long-term sick leave, you should still receive an account of what you’re being paid, and how much you’re being taxed.
Tax and National Insurance
Your tax code will be provided by the Inland Revenue and it tells your employers how much money to deduct from your pay for tax purposes. You could end up paying too much or too little if you have the wrong tax code, so clarify your tax status with the HMRC if you have had multiple jobs in the same year.
Your National Insurance number will also be clearly shown on your payslip, and you must have one in order to legally work in the United Kingdom. Your National Insurance number will stay the same your entire life, even if you change jobs, change your name or even move abroad. The purpose of the NI number is to make sure that the tax you pay is properly recorded on your account, and unless you are self-employed, these contributions are taken automatically from your pay.
The payments section of your payslip shows your wages in their entirety before any deductions have been made (gross wages), and some also show a breakdown how your gross pay was calculated – hourly or weekly for example. It also shows any commissions or bonuses you’ve earned too. If you think that your employer is failing to pay you your correct salary, contact commercial solicitors in Crewe for financial and employment advice.
Deductions will also be shown on your payslip, such as Tax, National Insurance and any pension contributions. These amounts will vary depending on your tax bracket.
Year to Date
There will be a section on your payslip that will show how much you’ve earned/been paid so far in the financial year (April 6 to April 5), and it will also show how much tax you’ve paid too.
Here you’ll be able to see how much of your wage you have left after all contributions have been deducted, like Tax, National Insurance or Pension Contributions. In order to ensure that your finances are in order, make sure you check your net pay against your bank statements. The last thing you want is to be spending money that you don’t have!
This article was written on behalf of commercial solicitors in Crewe