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Gross & Net Income

 

Gross income is our income before any deductions or exemptions. For example, if your supervisor said you would earn £10 an hour and you worked 20 hours, your gross income would be £200 (that’s £10 x 20 = £200).

Your net income is commonly called your “take home pay;” it is your income after all deductions and exemptions. Deductions include anything that is subtracted from that gross amount. While some deductions are voluntary, paying taxes and National Insurance is required.

Reading a Payslip

There are lots of confusing numbers on your payslip including your gross salary (the actual amount you were quoted when you joined) plus the amount you need to pay in tax for this month and the amount taken out for National Insurance (another tax really although it’s not called that).

Payslip2

Every pay statement is supposed to have:
  • the amount of your wages before any tax or anything else is taken out (gross wages)
  • the individual amount of any fixed deductions (such as trade union subscriptions) or the total amount of these deductions if you are given a ‘standing statement of fixed deductions’
  • the individual amount of any variable deductions (like your tax or pension contributions)
  • the net amount of your wages (this is the total amount you get after all the deductions)
  • the amount and method for any part-payment of wage (such as separate figures of a cash payment and the balance credited to a bank account)
Your employer might also include other elements on your payslip such as:
  • your National Insurance number
  • your tax codes
  • your pay rate (either annual or hourly)
  • any additional payments like overtime, tips or bonuses, which might be shown separately

To see an example Payslip please click here.

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