Payslips are sometimes difficult to understand, however it is important to know how your pay is being calculated. Although some employees will examine their payslip each pay period, checking the tax and other deductions, others will never glance at theirs, assuming it is correct.

What is a payslip?

A payslip is a document that is given to the employee each payday. It shows you the total amount earned, less deductions such as tax and NI.

What information your payslip should contain

• Gross Pay – Your pay before any tax or national insurance has been deducted
• Net Pay – Total amount of take-home pay after deductions
• Variable Deductions – The amounts of any deductions that change from payday to payday such as Tax and National Insurance
• Fixed Deductions – These deductions don’t change from payday to payday, such as Union fees.
•  Amount and Method of Pay
• Number of hours worked if your pay varies

Your employer may also include additional information on your payslip such as:

• Tax code
• NI Number
• Pay Rate (annually or Hourly)
• Extra payments, such as overtime, tips or bonuses.

Understanding your payslip

• Your personal information – Name and home address
• Your payroll number – used to identify individuals on the payroll
• Date – The date your pay should be paid
• Tax Period – Represents the tax period the payslip relates to
• Tax Code – Sent to you from HMRC, tells you how much tax-free pay you should get before deducting tax.
• Your National Insurance Number
• Payments, wages, bonuses and commission – How much you have earned in wages, any extra payments you have earned on top of your basic pay such as bonuses, commission, etc
• Expenses – You employer might pay any expenses owed to you
• Deductions – Tax and NI deducted
• Pensions – If you are paying towards a workplace pension your contributions will be shown
• Student Loan – Any repayments on a student loan
• Court orders and child maintenance – A court can order deductions directly from your pay.
• Sick Pay
• Maternity, Paternity and Adoption pay
• Workplace benefits
• Other deductions
• Summary of Year to Date
• Net Pay – The amount you get after all deduction have been made
• Notes – Some employers use this to write important messages

What is a tax code?

The amount of tax you pay depends on:

• How much income you have
• How much tax you’ve already paid in the year
• Your personal allowance

There are different tax codes for different people depending on their circumstances. HMRC sends out tax coding notices which will tell you what your tax code is and how much tax you have paid each year.

Your tax code is usually the amount you can earn without paying tax. For example:

Tax code 1257L – 1257 becomes £12,570 earned before tax.

If you have:

• tax code BR – You are not getting your tax free allowance o all your income is taxed at 20%
• no number or starts with a D for your tax code – You have more than one source of income.
• tax code starts with K – you have tax from the past that you still need to pay or you get money from benefits that can’t be taxed.

You can check your tax code with HMRC to make sure you are getting your personal allowance.

 Keeping Your payslip

It is important to keep your payslip in a safe place. Most payslips are done online using your employers payroll provider so it is important to keep your email with your wage slips safe, and here why:

• Security – They contain a lot of personal information about your earnings, so keeping them safe will avoid them being used for identity fraud
• Recordkeeping – Keeping a record of all your earnings and tax payments in case there is a problem and you need your old information
• Evidence of earnings – If you are looking at taking a loan out for example, they may ask you to prove your earnings of your last three payslips.

If you don’t understand parts of your payslip or thin there might be a mistake, contact your employer or speak to someone in the payroll team.