Understanding Your Payslip
Understanding your payslip
What information must be included on your payslip?
Your payslip includes a range of information depending on your role however there are five things it must always display.
1. Gross pay – this is your total earnings, before any deductions or taxes.
2. Variable deductions – this refers to the deductions that could change each payday, and will show the amount that’s being deducted. It includes tax and National Insurance.
3. Fixed deductions – these are the deductions which remain the same each month. An example of these are trade union subscriptions. If you have fixed deductions on your payslip and it is not stated what they are, your employer must provide you with a standing statement of fixed deductions.
4. Net pay – this is the amount of money remaining after all deductions have been made, this is the amount that you will receive in your bank account on pay day.
5. The amount and method for any part payment of wage- For example, separate figures of a cash payment and the balance credited to a bank account.
Video guide to your payslip
Please watch the video below to see where you can find the information on your Flashbay payslip.
Useful Payslip Definitions
Payslips can seem confusing, with lots of jargon that you may not be familiar with. The information included in your payslip will vary depending on your individual earnings, benefits, and deductions. Below are definitions for commonly queried payroll terms to help you understand your payslip better:
Expenses: If you’re owed any expenses (e.g. travel costs or company lunches), these will be displayed here.
National Insurance (NI) or (NIN) number: This is the UK’s social security system. Your NI number confirms that you’re eligible for work in the UK. You also have a National Insurance number to make sure your National Insurance contributions and tax are recorded against your name only.
Payment method: Most employers will pay your earnings directly into your bank account. This is done through a system called Banker’s Automated Clearing Services, or BACS for short – which is what you’ll normally see on your payslip.
Payroll number: Some companies use payroll numbers to identify individuals on their payroll. For Flashbay, this number will be displayed in the format: EM0000.
Pensions: If you’re paying towards a workplace pension that your company has set up or arranged access to, the amount you’re contributing will be shown on your payslip.
Student loan: If you’re making student loan repayments, this will be shown on your payslip.
Tax code: This indicates the rate you’re taxed at. To find out how much income you can earn in a financial year before you need to pay tax, simply add a zero to the number shown. For example, Tax code 1000L means you can earn £10,000 a financial year before paying any Income Tax. The most common letter is L, which means your tax rate is set at the standard rate. Tax codes are explained in further detail Link title , but If you have any further enquiries regarding your tax code, please contact HMRC.
Tax period: The number here represents the tax period for that payslip. For example, if you are paid monthly, this would translate as: 01 = April and 12 = March. This is also referred to as the financial year.
Year-to-date (YTD): This describes how much you’ve earned so far this financial year. Our financial year is from April 1st - March 31st.
Useful Payroll Abbreviations
BACS – Bankers Automated Clearing Services
A payment scheme that processes financial transactions electronically.
BA/BP – Bereavement Allowance/Bereavement Payment
A weekly allowance given to widowers or surviving civil partners.
CHB – Child Benefit
An allowance given to parents with children under 16.
CTC – Child Tax Credits
An allowance given to parents with children under 16.
ET – Earnings Threshold
The amount you can earn before being required to pay tax.
HMRC – Her Majesty’s Revenue and Customs
The department of government responsible for tax collection.
LEL – Lower Earnings Limit
The amount you can earn before being required to pay National Insurance.
NIC – National Insurance Contributions
A sum deducted from your salary, in addition to tax.
PAYE – Pay As You Earn
A tax deduction taken from HMRC.
PILON – Payment in Lieu of Notice
A compensation payment that covers the notice period of an employee who has been terminated/told not to work their notice.
PP – Personal Pension
Payments made to a pension provider.
SAP – Statutory Adoption Pay
An allowance given to people during the leave they take to adopt a child.
SEE – Small Earnings Exception
An exemption of Class Two National Insurance contributions, given to self-employed people who’s profits are less than £5,725 a year.
SMP – Statutory Maternity Pay
An allowance of 39 weeks, given to female employees during the leave they take before and after having a child.
SPP – Statutory Paternity Pay
An allowance of 2 weeks, given to male employees during the leave they take before and after having a child.
SSP – Statutory Sick Pay
Pay given to employees who have been absent from work due to illness.
TY – Tax Year
The year in which tax is calculated, starting 6th April in the UK.
VAT – Value Added Tax
Value based tax added to goods and services.
Understanding Tax Codes
The amount of tax you pay depends on your total income and your Personal Allowance.
HMRC assigns each individual a tax code. Different people have different tax codes, depending on their circumstances. If the tax code you are assigned is incorrect, you could end up owing the government money, even if it’s not your fault. Checking that your tax code is correct should avoid you over or underpaying tax.
You can estimate how much tax you should pay on the government website here. You can also read more about Income Tax on the government website site here here.
What the numbers and letters mean in your tax code
The number is normally the amount you can earn before any tax is due divided by 10. The letter is how much tax you need to pay.
• If your tax code ends in an L - This tax code is used for people who have one job or pension. Most people will be able to earn £11,850 before tax, which means their tax code will be 1185L.
• If your tax code ends in an M or N - These codes represent anyone who has the Marriage Allowance. Couples who are married or in a civil partnership can transfer 10% of their personal allowance to their partner (as long as they meet the criteria). The partner receiving the extra allowance will have the M rather than normal L, while the other partner has N.
• If your tax code is BR or the letter D followed by a number - These usually means you have more than one source of income such as a second job, pension or money paid out by investments. If your main income source is more than your personal allowance (so for most that is £11,850), the second salary/income will all be subject to tax. BR means all of your second income is taxed at the basic rate (20%), whilst D relates to a higher rate (40%).
• If your tax code starts with K - This means you could be paying tax owed from a previous financial year and it’s more than your personal allowance. You might also have this if you get state or work benefits, like the State pension or a company car, you need to pay tax on. The amount you get taxed can’t be more than half the amount you’ve earned or received that pay period (whether that’s monthly, weekly or another period).
• If your tax code ends W1 or M1 at the end - This means you’re on an emergency tax code. For example, if you start a new job your correct tax code might not have been worked out before your first payday. This means you’ll possibly be taxed the wrong amount to start, but this is usually updated automatically and will level out.
• Checking your tax code - To make sure you’re on the right tax code, check your code matches the Personal Allowance you should be getting and see if you’ve paid the right amount.
• If you think you’ve paid too much tax - You can check if you’re due a refund on the HMRC website here or use the HMRC online tax checker here. Depending on your circumstances, you may be able to ask for a refund using a form, or you may need to contact HMRC directly.
• If you think you haven’t paid enough tax - If you think you’ve underpaid tax, then let HMRC know. They may alter your tax code for the next financial year and claim the money back from your salary, though this will only be up to £3,000.
