Understanding your payslip

Understanding your payslip

Posted: Wed, 10 Apr 2024 12:21

"I've just got my first payslip from a new job, I'm slightly embarrassed to say I don't understand what all the different sections refer to. How do I know what each means and if it's correct? "

Citizens Advice Charnwood say - there's no need to be embarrassed about not understanding your payslip, it contains lots of information which can be tricky to get your head around, but it is important to understand.

Your payslip shows your pay, deductions and tax information. All employers are required to give their employees a payslip and it's a good idea to keep them for as long as possible.

The top left corner of your payslip is where you'll usually find your employer's details. Opposite this, in the middle or top right corner, should be your details. This is also where you might find your payroll or employee number, this is what your employer uses to identify you for payroll purposes.

Next, you'll see lots of different numbers and codes. The payment date is when your pay will normally arrive in your bank account, it can be monthly or weekly and fall on any day of the month.

Your National Insurance (NI) number refers to your unique number. You must have a NI number to work in the UK. It's used to make sure all your NI contributions are recorded and so you can get any state benefits you're entitled to, including state pension later in life.

Your payslip might show a tax period, the tax year starts in April and ends in March. The number here corresponds to the period in which you're being taxed, eg. if you're paid monthly, 01 will represent the tax period in April, while 12 would mean March.

Next is your tax code. This is decided by HM Revenue and Customs (HMRC) and is used by your employer or pension provider to work out how much Income Tax to take from your pay. Your tax code is made up of several numbers and a letter. The numbers refer to how much tax-free income you get while the letters can mean different things depending on your circumstances. You can find out what they mean on the government website gov.uk – Income Tax.

Make sure you're not on an emergency tax code otherwise you'll be taxed more than needed.

Now to your pay and deductions: -
Gross pay, means how much you've earned before anything is deducted. Deductions are amounts taken from your gross pay, common ones include: income tax, national insurance, pension or student loan payments. Income tax is the tax you pay on your earnings to fund public services, this is something you have to pay but the amount will vary depending on your earnings. You pay National Insurance so you can be entitled to certain benefits, and it also contributes towards the NHS. Most payslips will add up all the deductions from your pay into a single amount to make it easier for you to see how much is taken from your pay each month.

Your net pay is the amount of money you will receive after all the deductions have worked out.

Lastly, taxable pay is the amount of your salary, to date in the current tax year, that has been subjected to tax. This will usually appear next to your net pay figure.

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Tags: Wage slip, advice, finances, pay slip, tax, tax codes