1. WAGES Eastbourne Citizens Advice Bureau Financial Literacy Wages
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2. In this unit we will look at a standard wage slip Tax
National Insurance
P45 and P60
The National Minimum wage
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3. This is a typical layout for a payslip
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4. Here we see the employer’s name and your name.
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5. This is your national insurance number
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6. WHAT IS NATIONAL INSURANCE?
National Insurance contributions are payments which most people make towards the National Health Service and to enable them to get entitlement to some social security benefits and state pension. For employed earners, contributions are paid as a percentage of income above a certain level. Self-employed people pay a set weekly rate and, if their profits are high enough, a percentage of their income.
Someone who is unemployed or unable to work through sickness may have contributions credited.
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7. The Inland Revenue and Department for Work and Pensions (DWP) use your national insurance number (NINO) to identify your contribution and benefit record.
The number always consists of two letters, six numbers and a letter, for example, AB C.
National Insurance is currently 12%, but it doesn't start until you earn at least £149 a week.11
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8. This is your Tax Code
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9. Income Tax
Income Tax is money deducted from your earnings which is paid to the government. The government department in charge of collecting tax is the Inland Revenue.
If you work for an employer your tax and National Insurance will be paid automatically. It comes straight out of your wages before you receive them. This is known as Pay As You Earn (PAYE).
Everybody can earn a certain amount (known as the Personal Allowance) before they start paying tax or National Insurance. From April 2013 the personal allowance is £9,440. This figure changes yearly.
Normally you pay:
20% on anything you earn between £9,440 and £32,010)
40% on anything between £32,011 and £150,000 and
45% on anything over £150,000
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10. The number in the tax code is usually three figures
The number in the tax code is usually three figures. It represents the total of all available allowances, minus any amount to be deducted to cover other income or benefits, and with the last digit removed. The allowance as shown by the number in the tax code is then rounded up.
The letter indicates what kind of tax code it is. In this example L means the Basic Tax allowance.
For example, if your total income is £9,992, of which £9440 is not taxable, your code is 944L.
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11. The payment method is BACS
BACS stands for Bankers Automated Clearing System.
BACS is an automated service operated by banks and building societies. It means the money is transferred directly from the company’s account into the employee’s bank account. You may also be paid by cash or cheque.
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12. There are two entries, one for basic and one for overtime
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13. Add together the 2 rates of pay giving a total of £934.11
This is subject to tax and National Insurance deductions.
Total pay is also known as Gross Pay
xxxxxxx
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14. The amount of tax deducted is spread out across the year.
The Deductions column shows the amounts of Tax and National Insurance.
The total Deductions is shown here
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15. Any other deductions which are taken from your wages at source such as union subscriptions, student loan repayments and private pension schemes will be shown in this column.
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16. So, total pay minus total deductions gives the amount you receive in wages.
£ £63.77 = £870.34
This is known as NET pay
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17. Here we see the total figures paid this year. It shows
Total pay (gross)
How much of that is taxable
The total tax paid
Total National Insurance paid by the employer and by the employee
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18. Any payments made to a pension scheme either by the employer or employee would be shown here.
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19. When you leave a job or you are dismissed you should receive a P45 from your employer P45 shows the amount that you have earned and how much tax you have paid this year.
You will need this form to give to your next employer or to claim benefits.
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20. A P60 details your earnings and tax deductions for the current tax year and is provided by your employer.
The law requires you to keep a record of your taxable income for at least 22 months after the end of the current tax year so make sure you keep it in a safe place as duplicates are not always easy to get.
Self-employed people must keep records for up to six years after the relevant tax year.
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21. National minimum wage (NMW) Workers in the UK aged 16 (and above school leaving age) or over are now legally entitled to a national minimum hourly wage, regardless of where they work, the size of the firm or the worker’s occupation.
This includes casual labourers, agency workers, homeworkers, workers on short-term contracts and workers employed by subcontractors. Before October 2004, workers aged between 16 and 17 were not entitled to the national minimum wage.
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22. There are some workers who are not covered by the national minimum wage. These are:-
workers aged under 16
some apprentices
some people living and working within a family such as nannies and au pairs, where they work and they share meals with the family and they do not have to pay towards their accommodation costs or meals
self-employed people
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23. Workers who are not covered by the national minimum wage (continued) workers aged under 16
members of the armed forces
share fisherman
prisoners
voluntary workers
some trainees on government schemes.
workers who are homeless or living in a hostel, who are entitled to income support/income based jobseeker’s allowance and who are taking part in a scheme run by a charity which provides them with work
residential members of religious communities.
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24. How much is the NMW For most workers aged 21 and over, the standard hourly rate of the NMW is listed below.
Workers aged between 18 and 20 or apprentices are only entitled to be paid at a lower rate.
Workers aged 16-17
£3.68
Workers aged 21 and over
£6.19
Workers aged between reduced rate NMW
£4.98
Apprentices under 19 or 19 and over in the first year of apprenticeship
£2.65
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25. Pay and Work Rights Helpline on Tel: 0800 917 2368
National Minimum Wage Helpline
If you want to find out if you are eligible to claim the NMW you can contact the
If you think you are entitled to the NMW but your employer is not paying it to you
If you think you are entitled to the national minimum wage and are not receiving it you should contact the NMW helpline (see above) or seek the help of an experienced adviser, for example, at a Citizens Advice Bureau.
Pay and Work Rights Helpline on Tel:
Or visit the website at
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