Paying attention to your payslip can help you to understand how much you're saving into your pension, how much tax you're paying and what workplace benefits you might be taxed on.

It's important to check your payslip regularly to make sure you're not paying too much or too little tax. You can also see how much you're contributing towards your State Pension.

What sort of information is on my payslip?

Whether you receive your payslip as a piece of paper or electronically, the basic information will include the payroll number for your workplace, the amount of pay you've received before tax and/or pension contributions (known as your gross pay) and the amount of pay after tax (known as your net pay).

It will also contain your tax code. There are a number of different tax codes. Your tax code is used by your employer or pension provider to work out how much income tax to deduct from your pay.

You should receive a payslip if you work part-time or on a casual basis for a company, as well as if you are a full-time employee. You won't receive a payslip if you're freelance.

What is National Insurance?

Also known as NI, National Insurance is the system that you pay into in order to have a State Pension when you reach retirement age. You pay different rates of National Insurance depending on whether you're employed or freelance. Your NI number is personal to you and enables you to work in the UK. You'll see this on your payslip – it's a combination of letters and numbers.

What does National Insurance pay for?

National Insurance contributions are a form of tax which you and your employer pay towards the State Pension. NI changes each month, depending on how much you earn. Paying NI contributions also gives you access to maternity allowance. If you're wondering what the NI codes are, they're divided into four separate classes of contributions.

Employees pay Class 1 National Insurance, while freelance and self-employed people pay Class 2 National Insurance when their profits are £6,475 or more each year. If they earn less than this, they have the option to pay voluntary contributions instead. If self-employed people earn more than £9,501 profit per year then they have to pay Class 4 National Insurance contributions. National Insurance Class 3 contributions are voluntary payments you can make to top up your National Insurance entitlement to a State Pension.

What is the difference between gross and net income?

Net income is also known as your ‘take-home pay’ and is the amount of pay that is paid into your bank account.

Gross income, known also as gross salary, is the amount of money you've earned each month before deductions such as tax, NI, pension contributions and any other payments or tax have been taken off.

Taxable income is the amount of money on which you'll pay tax. It includes bonuses, commission, some work expenses, profits from self-employment, maternity and paternity pay, redundancy pay, sick pay and wages. It's separate from capital gains, which is the increase in the underlying value of assets you may own, such as second homes or shares, which are subject to a different tax – called Capital Gains Tax (CGT).

What is the personal allowance?

The government gives everyone a certain amount of income on which they don't have to pay tax. This is known as the ‘personal allowance’. For the 2020-21 tax year the standard personal allowance is £12,500. Everyone has this allowance and you only start paying income tax on amounts that you've earned above this threshold.

If you have workplace benefits from your employer such as a company car, gym membership, health insurance or other perks, you may have to pay tax on the value of these, which are known as ‘benefits in kind’.

What are the tax bands for income tax?

There are three different tax bands – basic rate, higher rate and additional rate. How much you pay takes into account the £12,500 personal allowance.

The threshold for paying basic-rate tax is between £12,501 and £50,000 and you pay 20% on this band of income.

For higher rate, you pay 40% tax on income between £50,001 and £150,000. You pay an additional rate of 45% tax on amounts above £150,000.

What deductions might show up on my payslip?

Your payslip may contain details of maternity pay, shared parental leave, student loan repayments, and any other workplace schemes such as a company pension, season ticket loan for transport or travel, or an auto-enrolment pension scheme. It'll give information about how much pension contribution you 've made, or how much you are repaying on your student loan.

How can I spot and report errors?

Compare your tax code on your payslip to the tax code on the latest letter you have received from the tax office. If you have any questions, talk to your workplace payroll department. If the code is wrong, you may be overpaying or underpaying tax.

What information might I need at the end of the tax year?

You may need to fill in a self-assessment tax form at the end of each financial year if you're a higher- or additional-rate taxpayer, or you have other forms of income in addition to your main job.

If you have profits from a side business or rent, or dividends from shares, you'll need to declare these to the tax office.

 

Please note that the figures provided refer to the 2020/21 tax year.

The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.

Paying attention to your payslip can help you to understand how much you're saving into your pension, how much tax you're paying and what workplace benefits you might be taxed on.

It's important to check your payslip regularly to make sure you're not paying too much or too little tax. You can also see how much you're contributing towards your State Pension.

What sort of information is on my payslip?

Whether you receive your payslip as a piece of paper or electronically, the basic information will include the payroll number for your workplace, the amount of pay you've received before tax and/or pension contributions (known as your gross pay) and the amount of pay after tax (known as your net pay).

It will also contain your tax code. There are a number of different tax codes. Your tax code is used by your employer or pension provider to work out how much income tax to deduct from your pay.

You should receive a payslip if you work part-time or on a casual basis for a company, as well as if you are a full-time employee. You won't receive a payslip if you're freelance.

What is National Insurance?

Also known as NI, National Insurance is the system that you pay into in order to have a State Pension when you reach retirement age. You pay different rates of National Insurance depending on whether you're employed or freelance. Your NI number is personal to you and enables you to work in the UK. You'll see this on your payslip – it's a combination of letters and numbers.

What does National Insurance pay for?

National Insurance contributions are a form of tax which you and your employer pay towards the State Pension. NI changes each month, depending on how much you earn. Paying NI contributions also gives you access to maternity allowance. If you're wondering what the NI codes are, they're divided into four separate classes of contributions.

Employees pay Class 1 National Insurance, while freelance and self-employed people pay Class 2 National Insurance when their profits are £6,475 or more each year. If they earn less than this, they have the option to pay voluntary contributions instead. If self-employed people earn more than £9,501 profit per year then they have to pay Class 4 National Insurance contributions. National Insurance Class 3 contributions are voluntary payments you can make to top up your National Insurance entitlement to a State Pension.

What is the difference between gross and net income?

Net income is also known as your ‘take-home pay’ and is the amount of pay that is paid into your bank account.

Gross income, known also as gross salary, is the amount of money you've earned each month before deductions such as tax, NI, pension contributions and any other payments or tax have been taken off.

Taxable income is the amount of money on which you'll pay tax. It includes bonuses, commission, some work expenses, profits from self-employment, maternity and paternity pay, redundancy pay, sick pay and wages. It's separate from capital gains, which is the increase in the underlying value of assets you may own, such as second homes or shares, which are subject to a different tax – called Capital Gains Tax (CGT).

What is the personal allowance?

The government gives everyone a certain amount of income on which they don't have to pay tax. This is known as the ‘personal allowance’. For the 2020-21 tax year the standard personal allowance is £12,500. Everyone has this allowance and you only start paying income tax on amounts that you've earned above this threshold.

If you have workplace benefits from your employer such as a company car, gym membership, health insurance or other perks, you may have to pay tax on the value of these, which are known as ‘benefits in kind’.

What are the tax bands for income tax?

There are three different tax bands – basic rate, higher rate and additional rate. How much you pay takes into account the £12,500 personal allowance.

The threshold for paying basic-rate tax is between £12,501 and £50,000 and you pay 20% on this band of income.

For higher rate, you pay 40% tax on income between £50,001 and £150,000. You pay an additional rate of 45% tax on amounts above £150,000.

What deductions might show up on my payslip?

Your payslip may contain details of maternity pay, shared parental leave, student loan repayments, and any other workplace schemes such as a company pension, season ticket loan for transport or travel, or an auto-enrolment pension scheme. It'll give information about how much pension contribution you 've made, or how much you are repaying on your student loan.

How can I spot and report errors?

Compare your tax code on your payslip to the tax code on the latest letter you have received from the tax office. If you have any questions, talk to your workplace payroll department. If the code is wrong, you may be overpaying or underpaying tax.

What information might I need at the end of the tax year?

You may need to fill in a self-assessment tax form at the end of each financial year if you're a higher- or additional-rate taxpayer, or you have other forms of income in addition to your main job.

If you have profits from a side business or rent, or dividends from shares, you'll need to declare these to the tax office.

 

Please note that the figures provided refer to the 2020/21 tax year.

The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.

Paying attention to your payslip can help you to understand how much you're saving into your pension, how much tax you're paying and what workplace benefits you might be taxed on.

It's important to check your payslip regularly to make sure you're not paying too much or too little tax. You can also see how much you're contributing towards your State Pension.

What sort of information is on my payslip?

Whether you receive your payslip as a piece of paper or electronically, the basic information will include the payroll number for your workplace, the amount of pay you've received before tax and/or pension contributions (known as your gross pay) and the amount of pay after tax (known as your net pay).

It will also contain your tax code. There are a number of different tax codes. Your tax code is used by your employer or pension provider to work out how much income tax to deduct from your pay.

You should receive a payslip if you work part-time or on a casual basis for a company, as well as if you are a full-time employee. You won't receive a payslip if you're freelance.

What is National Insurance?

Also known as NI, National Insurance is the system that you pay into in order to have a State Pension when you reach retirement age. You pay different rates of National Insurance depending on whether you're employed or freelance. Your NI number is personal to you and enables you to work in the UK. You'll see this on your payslip – it's a combination of letters and numbers.

What does National Insurance pay for?

National Insurance contributions are a form of tax which you and your employer pay towards the State Pension. NI changes each month, depending on how much you earn. Paying NI contributions also gives you access to maternity allowance. If you're wondering what the NI codes are, they're divided into four separate classes of contributions.

Employees pay Class 1 National Insurance, while freelance and self-employed people pay Class 2 National Insurance when their profits are £6,475 or more each year. If they earn less than this, they have the option to pay voluntary contributions instead. If self-employed people earn more than £9,501 profit per year then they have to pay Class 4 National Insurance contributions. National Insurance Class 3 contributions are voluntary payments you can make to top up your National Insurance entitlement to a State Pension.

What is the difference between gross and net income?

Net income is also known as your ‘take-home pay’ and is the amount of pay that is paid into your bank account.

Gross income, known also as gross salary, is the amount of money you've earned each month before deductions such as tax, NI, pension contributions and any other payments or tax have been taken off.

Taxable income is the amount of money on which you'll pay tax. It includes bonuses, commission, some work expenses, profits from self-employment, maternity and paternity pay, redundancy pay, sick pay and wages. It's separate from capital gains, which is the increase in the underlying value of assets you may own, such as second homes or shares, which are subject to a different tax – called Capital Gains Tax (CGT).

What is the personal allowance?

The government gives everyone a certain amount of income on which they don't have to pay tax. This is known as the ‘personal allowance’. For the 2020-21 tax year the standard personal allowance is £12,500. Everyone has this allowance and you only start paying income tax on amounts that you've earned above this threshold.

If you have workplace benefits from your employer such as a company car, gym membership, health insurance or other perks, you may have to pay tax on the value of these, which are known as ‘benefits in kind’.

What are the tax bands for income tax?

There are three different tax bands – basic rate, higher rate and additional rate. How much you pay takes into account the £12,500 personal allowance.

The threshold for paying basic-rate tax is between £12,501 and £50,000 and you pay 20% on this band of income.

For higher rate, you pay 40% tax on income between £50,001 and £150,000. You pay an additional rate of 45% tax on amounts above £150,000.

What deductions might show up on my payslip?

Your payslip may contain details of maternity pay, shared parental leave, student loan repayments, and any other workplace schemes such as a company pension, season ticket loan for transport or travel, or an auto-enrolment pension scheme. It'll give information about how much pension contribution you 've made, or how much you are repaying on your student loan.

How can I spot and report errors?

Compare your tax code on your payslip to the tax code on the latest letter you have received from the tax office. If you have any questions, talk to your workplace payroll department. If the code is wrong, you may be overpaying or underpaying tax.

What information might I need at the end of the tax year?

You may need to fill in a self-assessment tax form at the end of each financial year if you're a higher- or additional-rate taxpayer, or you have other forms of income in addition to your main job.

If you have profits from a side business or rent, or dividends from shares, you'll need to declare these to the tax office.

 

Please note that the figures provided refer to the 2020/21 tax year.

The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.

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