Payslips

Payslips come in a variety of designs.
They will usually show various totals and personal information, in addition to the actual pay.

Example

pay

Basic Pay = Pay earned during period without overtime or other remuneration.
Gross pay = Total of income earned during pay period.
Total Deductions = Total of all monies taken off.
Net pay = Gross pay – total deductions.
This is what you get “in hand” or “bottom line”.

Tax Code : This is how much you are allowed to earn before you pay tax.
Here, Joe Bloggs can earn £3960 prior to paying tax.

 

What is Joe Bloggs’ salary ?
His salary is £2133 x 12 = £25,596

 

Paul works a 35 hour week.
He is paid £5.80 per hour.
What is his weekly wage ?

Basic pay = Number of hours worked x hourly rate
                 = 35 x £5.80
                 = £203

 

Overtime

 

Overtime Paid = hourly rate x overtime rate x no. of hours worked

 

Example
Jack Soap earns £5.78 per hour. He normally works a 37 hour week, but this week
worked an extra 8 hours on  Saturday, at time and a half,
and 5 hours on Sunday at double time.

2

3

4
He earned £127.16 overtime

 

5

6

His gross pay for the week is £341.02

 

Superannuation

Superannuation contributions are payments made towards a pension.

Example ( Use payslip above)
What percentage of  Joe Bloggs’  salary is paid on superannuation?

7

Income Tax

Income tax is payable on all taxable income.

Taxable income = Total income – Personal Allowance – Any other allowances

The rates vary every year, but usually you pay a certain percentage.

The tax year runs from 6th April to 5th April , so Tax Year 2020/21 runs from 6th April 2020 to 5th April 2021.

 

scot Income Tax in Scotland

The Scotland Act 2016 provides the Scottish Parliament with the power to set all income tax rates and bands (except the personal allowance, which remains reserved) that will apply to Scottish taxpayers' non-savings, non-dividend (NSND) income from 6th April 2017 onwards.

In tax year 2020/21 the Scottish bands are

This is an example of a progressive tax system.

scottax

Source Data Scottish Government

In tax year 2020/21 , the UK bands are

UK Tax 2020/21

Source UK Government Income Tax

The taxable allowance for tax year 20/21 is £12,500

This has resulted in different calculations of tax.

Example

John Doe has a salary of £34,000 per annum and a personal tax allowance of £12,500. He has no other tax deductible allowances for the tax year 2020/21. What is the difference in tax paid if he is domiciled in Scotland versus tax paid domiciled in the rest of the UK ?

First, calculate the taxable income

Taxable income = Total income – Personal Allowance – Any other allowances

 

12

 

In Scotland, during tax year 20/21 John must pay

19% on the first £2,085

20% on the next £10,573

21% on the remaining £8,842

 

sc5

or looking at this differently,

Scot

His total income tax due is £ 4,367.57

In the rest of the UK, John pays a flat rate of 20% of the entire £ 21,500 since it is less than £37,500.

 

r5

 

Again , a different view

ruk

His total income tax due is £ 4,300.00

He pays £67.57 more tax in Scotland during tax year 2020/21

 

Example

A person on a salary of £25,000 during this tax year with a personal tax allowance of £12,500 and no other tax deductible allowances for the tax year 2020/21 would pay £20.85 less in Scotland than elsewhere in the UK.

sco6

 

sc62

 

r6

 

r62

 

Example

A person earns £40,000 in tax year 20/21 and pays 10% as superannuation.

40

Tax due in Scotland

sco40

Or, since pension is tax deductable, salary becomes £36,000

socky

 

Rest of UK

r40

 

National Insurance

National Insurance Contributions  (NIC’s) are payable in addition to Income Tax.
The threshold of earnings is the amount of money you can earn without paying NIC’s.
For the tax year 2005/06, the earnings threshold is £94 per week or £408 per month.
                        
            Table 2 : NI information 2005/06

  • If you earn above £94 a week and up to £630 per week you pay 11 per cent of this amount as 'Class 1' NICs 
  • you also pay one per cent of earnings above £630 a week as Class 1 NICs
  • you will pay a lower amount as an employee if you are a member of your employer's pension scheme
  •              (Discount of 1.6%   Tax Year  2005/06)

 

Example ( Use payslip above)

How much  Class 1 National Insurance is Joe Bloggs due to pay per month ?

ni

             

Rates 2020/21

natins

How much  Class 1 National Insurance is John Doe from above due to pay per month during tax year 2020/21?

nk

 

Source National Insurance

                                    

More info on taxation

© Alexander Forrest