Deducing the deductions that are taken from your pay

Q

MY SON has left school and is taking an apprenticeship. Could you explain to him about his payslip?

A

SO, YOU’VE left school and you’re looking to start your apprenticeship! Welcome to the world of work, it’s exciting, new and there is so much to learn.

When you receive your pay you may see some unexpected deductions in your payslip. These could include income tax and national insurance, which are deductions made by the government to run the country.

You are able to earn £1,041 per month without paying income tax, but if you earn more than £719pm you will pay national insurance, a tax by a different name.

This is charged at 12% of your income between £719pm and £4,168pm (if you’re that lucky!). Earnings over this, will attract national insurance at 2%.

You may have heard that the government cut national insurance for apprentices under 25, from April 2016. This is true, but only applies to the employers’ national insurance payments, not yours.

Now you’re earning, you may spend more than you previously did, so it’s important you manage your money correctly or you will easily get yourself into debt.

I want you to save 12.5% of your income, this is the same as you saving the first working hour of an eight-hour day. When you go into work, this first hour you save for your future, then the next couple of hours may be for your tax, then by lunch time it’s to cover your other bills.

If you’re under the age of 22, you may not be automatically enrolled into your employer’s workplace pension scheme along with your older colleagues.

But provided you earn £511.33pm you have the right to opt in to the scheme. If you do, your employer will have to contribute to your pension in the same way as for anyone who’s been automatically enrolled.

If you earn less than £511.33pm your employer has to give you access to a pension to save into if you ask them, but they’re not required to contribute to it.