What is a payslip?
A payslip, also referred to as a wage slip, is a document issued by your employer that lists details about your pay before tax, as well as any deductions.
Your payslip shows the income you earned over the pay period and year-to-date payroll. It should also show taxes and any other deductions that have been taken out of your earnings. Finally, it should show the amount you actually receive (your net pay).
Your payslips can also be used as a proof of income or employment, which is often needed if you apply for a loan or form of credit.
What do the different parts of my payslip mean?
- Your payroll number
Your payroll (or employee) number is the number used by your employer to identify you for payroll purposes.
- Your personal information
Your name and sometimes your home address will usually be shown on your payslip. If either of these things change, make sure to let your employer know.
- The date
This is usually the date that your pay will be paid into your bank account. Legally, you should receive your payslip on or before this date.
- Your National Insurance (NI) number
Your National Insurance (NI) number is the number used by HMRC to differentiate you from everyone else in the UK and stays the same throughout your life, even if you change your name. This ensures that any tax and NI you pay is credited against your name helping to build up any entitlement to state benefits such as pensions. You must have a NI number to work in the UK.
- Gross pay
This shows what you earn before any deductions have been taken out. This is made up of your base pay plus any overtime pay, bonuses or commissions for the pay period (if applicable).
- Tax period
The tax year runs from April 6th each year until April 5th of the following year and is broken up into different tax periods. If you’re paid monthly, for example, April 2022 was tax month 1 and December 2022 will be counted as tax month 9.
- Tax code. Your code is unique to you and is provided by HMRC. Your code tells your employer what tax needs to be deducted from your wage.
- Tax deductions
This is much tax has been taken from your gross pay. This amount is determined by your tax code.
- National Insurance (NI) deductions
National Insurance (NI) contributions are deducted from your pay if you are an employee earning more than £166 a week. This money is used to pay for things like pensions and maternity allowance.
- Pension details
If you’re paying towards a workplace pension the amount you’re paying will be shown here. EE is the amount you are paying into your pension pot and ER is the amount your employer is paying into your pension pot.
From 2018, all employers must provide a workplace pension scheme, enrol you into it, and contribute towards it if:
• You are aged between 22 and state pension age
• Earn at least £10,000 a year
You can opt out of this pension scheme if you wish
- The pay year to date
Some payslips will show how much you have been paid in the current financial year (usually shortened to TD or YTD on your payslip). They might also show you how much in total you have paid in tax and NI.
- Your net pay
This is the amount you will be paid after all deductions have been taken out.
You may see some of these terms on your payslip. What do they mean?
BACS
BACS stands for Bankers Automated Clearing Services. It’s an electronic system used to make payments directly from one bank account (in this case, your employer’s) to another (yours!). The main type of BACS payment as it pertains to payslips is Direct Debit.
Student loans
If you're making repayments on a student loan, this will be shown on your payslip. If you're an employee, you'll usually start making student loan repayments from the April following the date you graduate or leave your course. HMRC will tell your employer how to work out and deduct the right amount.
Court orders and child maintenance
A court can order deductions direct from your pay. These can be, for example, for unpaid fines, debt repayments and child maintenance.
Maternity/Paternity/Adoption pay
These may replace your usual pay if you’re off because you have a new child.
How long should I keep hold of my payslips?
While technically payslips only need to be kept until you’ve been issued your 45/P60, HMRC (Her Majesty’s Revenue and Customs) advises all employees to hang onto their payslips for as long as they possibly can.
At minimum, you should keep your records for at least 22 months after the end of the tax year the tax return is for. It’s also advisable to keep a record of payslips that show proof of pension contributions. Payslips are well worth holding onto for a few reasons – you never know when you might need them for a rent or mortgage application or to resolve pay queries down the line. For some financial products, such as loans, you might be asked to prove your earnings by showing your last three payslips.?
If you can, keep your payslips for longer, or at least your P60s – a document stating how much tax you’ve paid in a particular tax year, and P45s -a document you receive from your employer when your employment ends, showing how much tax you’ve paid on your salary so far for that year.