Transcript Understanding a payslip

UNDERSTANDING A PAYSLIP
Payslip
Money Works: Level 2 Topic 4
STARTER QUESTION
• You are a supermarket team leader earning an
annual salary of £15,000.
• How much do you take home each month?
A. More than £1,250?
B. Exactly £1,250?
C. Less than £1,250?
Payslip
Money Works: Level 2 Topic 4
2
NATIONAL INSURANCE (N.I.)
31/05/2010
The Supermarket Ltd.
EB-92-31-56B
Retail
Tax
N.I.
Basic Pay
Standard – 37.5hrs
per week
Payslip
Money Works: Level 2 Topic 4
647L
1250.00
227.16
BACS
Total Gross Pay
Taxable Pay
Tax Paid
142.02
Employee NI
85.14
Employer NI
Employee Pension
Employer Pension
1022.84
3
Your name here
Month 2
2500.00
2500.00
284.04
170.28
198.14
0.00
0.00
NATIONAL INSURANCE
• Everyone receives their National Insurance number just
before their 16th birthday. It will stay with you for life.
• Most people who work have to pay National Insurance
Contributions, unless they are one of the groups who are
exempt from the system.
• National Insurance is paid at 11%* of your salary.
• By paying National Insurance you are paying for benefits
(including the jobseekers allowance, Incapacity benefit, a
Widows Pension, and Maternity allowance) and the state
retirement pension.
Payslip
Money Works: Level 2 Topic 4
4
TAX CODE
31/05/2010
The Supermarket Ltd.
EB-92-31-56B
Retail
Tax
N.I.
Basic Pay
Standard – 37.5hrs
per week
Payslip
Money Works: Level 2 Topic 4
647L
1250.00
227.16
BACS
Total Gross Pay
Taxable Pay
Tax Paid
142.02
Employee NI
85.14
Employer NI
Employee Pension
Employer Pension
1022.84
5
Your name here
Month 2
2500.00
2500.00
284.04
170.28
198.14
0.00
0.00
TAX CODE
• Your Tax Code will show how much income you
are allowed to earn before you start to pay tax.
• It is the first 3 numbers of your tax allowance
followed by a letter. Most people have the letter
‘L’ which indicates that they have the basic tax
allowance.
• So 647L means this person can earn £6,470*
before they start to pay tax.
Payslip
Money Works: Level 2 Topic 4
6
BACS
31/05/2010
The Supermarket Ltd.
EB-92-31-56B
Retail
Tax
N.I.
Basic Pay
Standard – 37.5hrs
per week
Payslip
Money Works: Level 2 Topic 4
647L
1250.00
227.16
BACS
Total Gross Pay
Taxable Pay
Tax Paid
142.02
Employee NI
85.14
Employer NI
Employee Pension
Employer Pension
1022.84
7
Your name here
Month 2
2500.00
2500.00
284.04
170.28
198.14
0.00
0.00
BACS
• BACS is the Bankers Automated Clearing
System.
• If you are paid by BACS it means your pay goes
straight into your own bank account.
• It means you do not have to carry large sums of
money around on pay day.
Payslip
Money Works: Level 2 Topic 4
8
DEDUCTIONS
31/05/2010
The Supermarket Ltd.
EB-92-31-56B
Retail
Tax
N.I.
Basic Pay
Standard – 37.5hrs
per week
Payslip
Money Works: Level 2 Topic 4
647L
1250.00
227.16
BACS
Total Gross Pay
Taxable Pay
Tax Paid
142.02
Employee NI
85.14
Employer NI
Employee Pension
Employer Pension
1022.84
9
Your name here
Month 2
2500.00
2500.00
284.04
170.28
198.14
0.00
0.00
DEDUCTIONS
• Both National Insurance and Tax are deducted from your
pay. These are called compulsory deductions because
you must pay them.
• The tax that is taken off is called income tax.
• Everyone is allowed to earn some money before they start
to pay income tax; this is your tax allowance. For most
people it is £6,470* per year (per annum).
• Once your income goes above this allowance you will
have approximately 20 pence of every pound you earn
taken as income tax.
• So when income tax is added to National Insurance you
can expect to lose 30% of your income in deductions.
Payslip
Money Works: Level 2 Topic 4
10
GROSS PAY
31/05/2010
The Supermarket Ltd.
EB-92-31-56B
Retail
Tax
N.I.
Basic Pay
Standard – 37.5hrs
per week
Payslip
Money Works: Level 2 Topic 4
647L
1250.00
227.16
BACS
Total Gross Pay
Taxable Pay
Tax Paid
142.02
Employee NI
85.14
Employer NI
Employee Pension
Employer Pension
1022.84
11
Your name here
Month 2
2500.00
2500.00
284.04
170.28
198.14
0.00
0.00
GROSS PAY
• The total income that you receive before any
deductions are made is called your Gross Pay.
• Gross pay will be bigger than Net Pay.
Payslip
Money Works: Level 2 Topic 4
12
NET PAY
31/05/2010
The Supermarket Ltd.
EB-92-31-56B
Retail
Tax
N.I.
Basic Pay
Standard – 37.5hrs
per week
Payslip
Money Works: Level 2 Topic 4
647L
1250.00
227.16
BACS
Total Gross Pay
Taxable Pay
Tax Paid
142.02
Employee NI
85.14
Employer NI
Employee Pension
Employer Pension
1022.84
13
Your name here
Month 2
2500.00
2500.00
284.04
170.28
198.14
0.00
0.00
NET PAY
• This is the pay you have left after your
deductions have been removed.
• It is sometimes called your ‘take home’ pay.
• All the deductions are made by the Tax offices, so
you don’t have to do anything about it, except be
honest about how much income you earn.
• This system is called Pay As You Earn (PAYE).
Payslip
Money Works: Level 2 Topic 4
14
TOTALS
31/05/2010
The Supermarket Ltd.
EB-92-31-56B
Retail
Tax
N.I.
Basic Pay
Standard – 37.5hrs
per week
Payslip
Money Works: Level 2 Topic 4
647L
1250.00
227.16
BACS
Total Gross Pay
Taxable Pay
Tax Paid
142.02
Employee NI
85.14
Employer NI
Employee Pension
Employer Pension
1022.84
15
Your name here
Month 2
2500.00
2500.00
284.04
170.28
198.14
0.00
0.00
TOTAL DEDUCTIONS
This sums up all the deductions from your pay so far in the
tax year (April to March). If you were to leave the business
who paid you, then you should receive a P45. This would
contain:
• Your leaving date
• How much tax you have paid so far in this tax year
• How much pay you had earned so far in this tax year.
The tax year runs from April to March. So this payslip for August is
month 5. At the end of the tax year your employer should give you a
P60 which will tell you:
o The total amount of tax you have paid in this tax year
o The total amount of pay you have earned in this tax year.
Payslip
Money Works: Level 2 Topic 4
16
TOTAL DEDUCTIONS
Some people will choose to have other payments deducted
from their pay; these are called voluntary deductions.
E.g. Most people contribute to a pension scheme (a different
one to the state pension that you qualify for by paying
National Insurance payments). These contributions are
taken from your gross pay and invested to build up a
pension fund for you. When you retire, this fund will be used
to provide you with a retirement income (known as pension
or annuity). Another type of voluntary deduction is when you
choose to join a Trade Union and pay their fees every month
from your payslip.
Payslip
Money Works: Level 2 Topic 4
17