what your payslip means.
The moment you get a new job, you look forward to payday. Nothing feels better than seeing the money you’ve earned land in your account. Parents remind us “check your payslip” and “make sure your payslip is correct” but what are you actually looking at? There are several sections of a payslip you’ll want to check are correct, so here’s a breakdown of what you’re looking at and what you need to know.
Whether on salary or paid per hour, you’ll have a ‘Basic Pay.’ If salaried, you’ll have your ‘Rate’, which is your annual income and then your ‘Amount’ which is what you’ll receive that month (before tax). For pay per hour and part time jobs, the best thing you can do is to keep track of how many hours you work, especially if you work overtime! Mistakes can happen, hours can be missed and it’s always good to double check that the hours you’ve been paid for are the hours you’ve worked.
They’re something you don’t even think about until you look at your own payslip, but your tax code is what dictates how much tax you have deducted. Luckily, tax codes are much more straightforward than you may think. Although there are several letters and combinations in tax codes, there’s very few that are likely to be relevant to you.
1250L is currently the most common tax code for someone with one job. Basically, it means that you have a tax-free personal allowance of £12,500 for the year and you’ll be taxed on your earning above this amount. If you see this tax code on your payslip, it’s likely that you won’t have to change anything, and your tax should be correct in relation to your pay.
Emergency tax codes will end in either W1, M1 or X. They are usually seen when you’ve started a new job or moving from self-employed to working for an employer. If you’re on an emergency tax code, usually it will be updated for the following month’s pay and any extra tax you’ve paid that you shouldn’t have will be reimbursed.
If your tax code doesn’t change, it’s worth getting in touch with HMRC to updates your tax code.
The worst part of any payslip. The amount that is deducted is in proportion to what you earn. If you are employed, you’ll pay National Insurance. You don’t have to do anything, it will be automatically deducted from your pay. If you earn more than £183 a week, you will pay National Insurance and that goes towards paying for the NHS, unemployment benefit, sickness & disability allowances and the state pension.
Income Tax is another necessary deduction. The amount of income tax that you will pay depend on if your wage is over £12,500. Similar to National Insurance, it is deducted automatically from your wage.
If you want to know how much income tax and National Insurance you should be paying, or are uncertain that the amount you’re paying is correct, you can check: https://www.gov.uk/estimate-income-tax
If you’ve been to university, you’ll know about a Student Loan. As of right now, the threshold for paying back your student loan is £511 a week or £2,214 a month. You will pay back 9% of the amount you earn over the threshold.
For example, if you earned £2,500 per month that’s £286 over the threshold. So you would pay back £25.74 of your student loan a month, as that’s 9% of £286.
When you start earning the minimum amount to be eligible to start paying back your student loan, it will automatically be deducted from your pay alongside tax and National Insurance. If at some point your pay drops below the minimum threshold, you don’t need to do anything or contact anyone. You will automatically stop repaying your student loan.
And that’s it! The three key sections of a payslip. Remember, it’s important to check them regardless of how long you’ve been in a job. You’ve earned that money, you want to know that you’re getting paid correctly!