5 things to look out for in your first payslip
You’ve put in the hard work and it’s time for you to reap the reward. Whether it’s your first payslip or your hundredth, you should always pay close attention to your payslip to ensure you’re receiving everything you’re entitled to.
You’ll typically receive your payslip from your employer a few days before pay day. We spoke to a tax and accounting expert, Simon Kaye, who shared his top tips on what you should look out for on your payslip to ensure you’re receiving everything you’re entitled to.
1. Your gross pay
If, like the majority of salaried employees, you’re paid monthly, the gross pay figure on your payslip will typically be a twelfth of the salary that you agreed to in your employment contract.
2. PAYE tax and National Insurance
You may be left wondering why your salary never quite matches the money that ends up in your bank account. As a graduate entering the work force, you’re likely to be earning enough to have to pay tax on your income.
For the tax year that started on the 6th April 2019, the personal allowance (the amount of income you can receive tax-free) is £12,500, and anything you earn above the personal allowance (up to £50,000) will be taxed at 20%. If you’re lucky enough to be earning over £50,000, anything in excess of £50k will be taxed at 40%.
“Now I’ve been taxed, I get to keep the rest... right?” not quite! Aside from the tax, you’ll see a deduction of national insurance from your pay, which works out as roughly 2% of anything you earn over around £1,000.
3. Your tax code
You’ll also find a tax code on your payslip which is what HMRC use to determine how much of your hard-earned cash is deducted as tax. Tax codes can get complicated pretty quickly, but if your employment is your only income - and you earn less than £100,000 – your tax code is probably going to be 1250L for the 2019/20 tax year.
HMRC don’t always get tax codes right – or rather, they don’t have all the information they need to give you the right tax code – codes like ‘0T’, or ‘BR’ are emergency tax codes that HMRC use to when they can’t be sure what tax code you need.
If you have an emergency tax code, you may find that you’ve been paying too much tax and will no doubt want that money back! In most cases, a quick phone call to HMRC’s helpline is all it takes to claim back any overpaid tax, or if you’re not too sure you can always speak to an accountant.
If you have more than one source of income (for example some rental or investment income), getting your tax code right can be even more important and can cause unexpected surprises at the end of the tax year. If you’re ever in doubt about your tax affairs you’ll definitely want to speak to an accountant, and you might find that having good accountant is more helpful than you first thought!
4. Other Figures and Deductions
You may find other deductions from your net pay, for things like:
Student Loans: depending on how much you earn, and when you started your degree, you may see student loan repayments deducted from your net pay. If you started your degree after 2012, you'll only start paying back your student loan if you're earning over £25,716.
Pension: New laws on pension contributions mean that you'll see 8% of your net pay go towards your pension (although your employer will be putting in at least 3%). Whilst it might be disheartening to know that you won't see that money again for a long time, this is a well-needed nudge towards saving for retirement, and the money you invest now should be worth a lot more in the long run!
5. Your net pay
The government have had their cut, now you get yours. The all-important net pay should be the figure that reaches your bank account at the end of the month.
Don’t leave it to your employer to make sure you’re getting the right amount! It’s always worth checking that the amount on your payslip has been paid into your account. Simon Kaye is a Director of Lopian Gross Barnett & Co., an independent chartered accountants and financial advisory firm based in Manchester. For further information, visit http://www.lopiangb.co.uk/. You can contact HMRC on 0300 200 3300.