A chartered accountant has urged everyone who collects a paycheque to make three important checks – and if the details are incorrect, you could be losing out on cash
When did you last properly examine the wage slip from your employer? If you’re employed, you ought to receive a payslip each time you’re paid for your work. This contains crucial information such as your earnings, tax deductions, pension contributions, and other details regarding money going in or out.
Most of us would confess, though, that we rarely scrutinise our payslips properly. Provided the money lands in your bank account on time, many aren’t bothered about understanding the finer points – particularly if they remain consistent monthly. However, one chartered accountant has implored all wage earners to conduct three vital checks. This becomes particularly crucial if you’ve recently begun a new position or secured your first job.
Abigail Foster posted a video on Instagram emphasising the three most critical elements everyone ought to verify on their payslips. She explained that incorrect information could result in overpayments in certain areas, leaving you with less money monthly.
1. Tax code
The initial item to verify is your tax code. For the overwhelming majority, your tax code ought to read “1257L”.
This represents the code applied to most individuals with a single job, indicating the £12,570 personal allowance limit before income tax becomes payable. The L signifies you’re eligible for the standard allowance.
Abigail said: “It should be 1257L. If it’s not, please check yours, because it could mean you’re over- or underpaying tax. The 1257 refers to getting £12,570 of personal allowance.”
Tax codes might differ for certain individuals, and it’s down to you to ensure yours is accurate. The figures at the beginning always relate to personal allowance, but the letters indicate various things. For instance, “0T” means your personal allowance has been exhausted, and “NT” means you’re not paying tax on this income.
You can examine the complete list of tax codes on the GOV.UK website, which will also provide you with guidance on how to amend your tax code if you think yours is incorrect. It is your duty to ensure your tax code is accurate, not your employer’s.
2. Student loan deductions
Next, Abigail said everyone should verify if student loan payments are being taken from their pay slips. If you didn’t attend university or have no remaining debt, you shouldn’t be paying anything.
Nevertheless, if you know you do have student loan debt, you need to examine which plan you’re on and ensure that if you’re earning above the minimum threshold, you’re making the payments you should be making.
If you attended university before 2012, you’ll probably be on plan 1. Those who went between 2012 and 2023 should be on plan 2, whilst those who took out a student loan from 2023 onwards will be on plan 5.
Abigail said: “They all mean you repay at different thresholds, so please check it.”
3. Pensions
Pensions might seem like a distant concern, but planning ahead can ensure you’re not left high and dry in your golden years. You don’t want to find yourself short of funds in your old age because you didn’t squirrel away enough during your working life.
The financial expert encouraged people to scrutinise their employer’s pension scheme. She revealed that some firms will match pension contributions if you set aside a slightly larger chunk of your monthly wage, which can rapidly accumulate into a substantial nest egg.
Abigail advised: “Your workplace pension, for most people, works like you put in 5% and your employer puts in 3%. But have a look at whether if you put 6% in, your employer might match up to 6% or even higher.”
