In the third episode of the Key Life Stages season, Simon and Bex delve into the things that you need to know about your payslip when you get your first job.
- Simon and Bex introduce their comments on payslip deductions by making some observations on tax, including some examples of occasions when tax is mentioned in the Bible. [02:01]
- In response to a question from Bex, Simon explains why income tax and National Insurance are collected separately by the Government. [04:12]
- With the aim of helping listeners to understand their payslip and the salary deductions that are made, Simon talks about the Personal Tax Allowance and explains that wages and tax are scheduled evenly over the tax year, which runs from 6th April in one year to 5th April the following year. [05:51]
- The rate of tax to be paid depends on the annual salary but there are also some regional variations, affecting Scotland, in particular. [10:25]
- The amount and nature of National Insurance contributions are explained. [13:35]
- Pension deductions also have to be taken into account before the final amount of ‘take home pay’ can be calculated. [16:08]
- The figures are calculated for a worker earning £22,570 per year / £1880 per month:
- The tax to be paid is £1,774.30 for the year (£2,000 minus £225.70, saved on pension payments).
- National Insurance contributions will be £1,3324.20.
- And the pension contributions will be £1,128.50 for the year.
- So, the total deductions for the year are £4,227.
- The overall net (‘take home pay’) pay per year is therefore £18,343.
- And the monthly amount actually received by the worker, as recorded on their payslip, is £1,528. [19:03]
- Simon then highlights the fact that other expenses and payments can be included in payslips as time goes on. The crucial point to note, however, is the importance of checking (at least annually) that you understand your payslip and are confident that you are receiving the expected amount of pay and are making correct income tax and National Insurance etc payments. You are responsible for ensuring that these payments are correct, so it is vital that you get into the habit of checking the figures in order to avoid issues arising at a later date. [21:08]
- The next episode in the ‘Key Life Stages’ season will be ‘Buying Your First Home’ while the next ‘Where Your Treasure Is…’ episode to be published (next week) will be all about ISAs (Individual Savings Account). As usual, please get in touch with us through whereyourtreasureis@freerangepodcasting.co.uk, or on Instagram via whereyourtreasureispodcast. [23:27]
This show has been brought to you by Free Range Podcasting.
