Pay Day is a cause of celebration but what do you do with your pay slip?
Whether it arrives as a paper copy – or electronically – many of us just glance at the payment amount and then file it away without any second thought.
Now is the time to change that mindset and paying attention to your payslips can help you understand the following:
➢ How much you’re paying into your workplace pension
➢ Your tax and National Insurance liability
➢ Your receipt of workplace benefits.
Here, I have pulled together five top tips relating to your salary. Please note these only apply to those of you in receipt of PAYE and not the self-employed:
1. Check that your tax coding is correct. This allows your payroll team to assess and deduct your tax payments accordingly.
HMRC will send you a notice of coding annually. Check this is the same as the code on your payslip.
Currently, the threshhold for basic rate tax is between £12,501 and £50k and you pay 20 percent on this band of income. Income below £12,500 is tax free.
If you’re in a higher rate, you pay 40% tax on income between £50,001 and £150,000. You pay an additional rate of 45% tax on any income above £150k.
If you think your tax code may be wrong, speak to HMRC and your payroll team. Also raise any queries you may have about National Insurance payments.
2 – Are you contributing to your workplace pension?
Current legislation has made it easier than ever to contribute to a workplace pension. All eligible employees should be making automatic payments as well as their employers.
For more pensions advice, please do get in touch and I’ll be delighted to talk it through. You can also check out the Pensions Advisory website for basic information at Pension Wise
3 – Can you access workplace benefits?
Have a good look at your pay slip and check what you’re being charged for. Also chat to your HR and payroll team to make sure you know exactly what is available and how it may benefit you.
Good examples are health insurance; share options and travel concessions. If you’ve got a company car would it be better to take a car allowance or vice versa? Can you benefit from a season ticket loan?
4 – Are you saving for medium and longer-term financial goals?
Whether you’re in your 20s and carving out your early career to looking ahead to retirement, it’s never too early or late to plan.
Ideally, you’ll be saving 20% of your take home pay for medium and longer-term financial goals.
I know financial planning can appear complex and confusing and I use jargon-free English to help ensure that it becomes crystal clear. It’s vital to take appropriate advice as early as possible.
5 – Saving for a Rainy Day?
The current pandemic has demonstrated that none of us knows what’s round the corner. It’s vital to plan and prepare for the unforeseen – whether that’s in the form of protection polices and/or simply having some hard cash.
Ideally, keep three months’ earnings in an easy-access savings account. I can also talk through the options about protecting you and your family longer term.
The value of an invesmtent with St. James’s Place will be directly linked to the performace of the funds you select and the value can therefore go down as well as up. You may get back less that you invested.
The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief depends on individual circumstances.
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