Good Learning Co.
SavannahYear 8
← Citizenship
CitizenshipEarning, payslips and tax30 min★★★ difficulty

Reading a payslip: gross pay, tax and National Insurance

The first payslip is a shock, because the number at the bottom is smaller than the number you were promised. This lesson explains every line, so you can check that your employer and HMRC have it right.

Lesson overview

What you'll learn in this lesson

Understand a range of financial products and services, and how public money is raised and spent

Key learning points

  • • The lines on a payslip
  • • How income tax is worked out
  • • National Insurance and other deductions
  • • Tax codes, refunds and self-employment

This lesson at a glance

  • 30 minutes
  • 18 parts to scroll through
  • 4 quick checks
  • Marked quiz at the end
  • Gentle pace: short sittings with pauses

Words to know

financialproductsservicespublicraised

Scroll down — the lesson carries on below

Part 1 of 18 · Discover6%
1

Watch & discover

Part 1 of 18

Watch first

Reading a payslip: gross pay, tax and National Insurance

An English teaching video on this topic from What School Did Not Teach You. Watch it, then scroll down for the lesson.

In a nutshell

Understand a range of financial products and services, and how public money is raised and spent

2

What you already know

Part 2 of 18

Before we start

What you already know

You know that advertised pay is 'before deductions' and that governments raise money by taxation.

Recap: Income, spending and saving choices
3

Key words

Part 3 of 18

Key words

Words you'll need today

Gross pay
Pay before any deductions are taken.
Net pay
Take-home pay: what actually reaches your account.
PAYE
Pay As You Earn: the system where your employer deducts tax before paying you.
Personal Allowance
The slice of yearly income taxed at 0%.
Tax code
A code such as 1257L telling your employer how much allowance to apply.
National Insurance
A separate deduction that builds entitlement to the State Pension and some benefits.
4

Learning cycle

Part 4 of 18

Learning cycle 1 of 2

Gross to net

A short piece of teaching, then a check to make sure it has landed.

5

Explore the idea

Part 5 of 18

Learn

The lines on a payslip

A payslip shows gross pay, then each deduction, then net pay. Deductions normally include income tax, National Insurance, and often a pension contribution and student loan repayment. It also shows year-to-date totals, your tax code and your National Insurance number. Employers must give you one on or before payday, and you should keep them — they are your evidence if a figure is wrong.

6

Explore the idea

Part 6 of 18

Learn

How income tax is worked out

Income tax is charged in bands, and only the income inside each band is taxed at that band's rate. Using recent figures: the first £12,570 is the Personal Allowance and is taxed at 0%; income from £12,571 to £50,270 is taxed at the basic rate of 20%; income above that is taxed at 40% up to the higher threshold. So on a £30,000 salary you pay nothing on the first £12,570 and 20% on the remaining £17,430, which is £3,486 for the year, about £290 a month. Thresholds and rates change most years and differ in Scotland, so always check the current ones — the method is what stays the same.

7

Quick check

Part 7 of 18

Quick check

Net pay is

8

Reset break

Part 8 of 18

Pause

That's sitting 1 of 2 done

Stretch, get a drink, look out of the window. There is no timer and nothing is counting down — your place is saved, so you can come back in five minutes or tomorrow.

Stop here for now
9

Quick check

Part 9 of 18

Quick check

Using a £12,570 allowance and 20% basic rate, annual income tax on £20,000 is

10

Learning cycle

Part 10 of 18

Learning cycle 2 of 2

Bands, codes and checking

A short piece of teaching, then a check to make sure it has landed.

11

Explore the idea

Part 11 of 18

Learn

National Insurance and other deductions

National Insurance is charged separately, on weekly or monthly earnings above a threshold, at a percentage of the amount above it. It is not the same as income tax: it buys entitlement, so years of contributions count toward your State Pension. Workplace pension contributions are usually a percentage of pay, matched in part by your employer, and student loan repayments only start once income passes the plan's threshold.

12

Explore the idea

Part 12 of 18

Learn

Tax codes, refunds and self-employment

A tax code of 1257L means £12,570 of allowance spread across the year. A code ending BR taxes everything at basic rate, which is common on a second job and sometimes wrong. If too much tax is deducted — a frequent problem for students working summers — you can reclaim it from HMRC. If you are self-employed, nobody deducts anything: you register for Self Assessment, keep records of income and allowable expenses, and pay tax and National Insurance yourself by the January deadline.

13

Quick check

Part 13 of 18

Quick check

National Insurance differs from income tax because it

14

Quick check

Part 14 of 18

Quick check

A tax code of 1257L indicates

15

Common mix-ups

Part 15 of 18

Common mix-ups

Things people often get wrong

  • Thinking that earning £1 into the 40% band taxes your whole income at 40%. Only the income inside that band is taxed at that rate.
  • Treating National Insurance as just another tax. It also builds State Pension entitlement.
  • Assuming the tax code is always right. Wrong codes are common, especially with two jobs.
  • Believing the self-employed pay no tax. They pay it later and calculate it themselves, which is harder, not cheaper.
  • Confusing gross pay in a job advert with what will land in your account.
16

Challenge round

Part 16 of 18

Game · Sort it

Which of these are true?

Drag each card into the right column. Tap a card first if dragging is fiddly.

True

Not true

17

Mastery quiz

Part 17 of 18

Marked quiz

End of lesson quiz: Reading a payslip: gross pay, tax and National Insurance

6 questions, marked with the reasoning shown. No timer.

  1. 1. PAYE means tax is

  2. 2. On a £30,000 salary with a £12,570 allowance and 20% basic rate, yearly income tax is about

  3. 3. Someone earning inside the higher-rate band pays 40% on

  4. 4. A student who overpaid tax on a summer job should

  5. 5. A self-employed plumber pays income tax

  6. 6. Which line would you check first if your pay looked too low?

18

Lesson round-up

Part 18 of 18

Lesson round-up

Ready when you are

Quiz score

Not sat

Games

Not played

Points this lesson

0

Best run

0 in a row

Luna: 0 out of 4 on the practice checks. Only if you feel up to it — one more?

Ask Luna

Do the work

Your written work for this lesson

This is the part you'd do in your book at school. Pick the pieces below, write here or on paper, and photograph anything you draw or work out.

Case study

Should the town centre have a curfew for under-16s?

After a rise in reported vandalism, Harbrook council proposed that under-16s should not be in the town centre after 9 pm without an adult. Police recorded 62 incidents last year, most between 9 pm and midnight. Shopkeepers signed a petition supporting the plan.

A youth council objected. They pointed out that most young people in town at night were going home from sports clubs or work, that the plan punishes a whole group for the acts of a few, and that the library and the bus interchange are in the town centre. They asked instead for a late bus and a youth space.

The council voted to trial the curfew for six months and to publish the crime figures at the end.

Written for Good Learning Co.

Reading questions

  1. Give the strongest point on each side of the argument, using a fact from the case.
  2. Whose rights and whose responsibilities are involved here? Explain both.
  3. Write your own view on the curfew with reasons and one example.

  • Reading and response

    Reading

    Read the case in the lesson again and write what you think should happen, and why it is fair. Use one fact from the case as evidence.

    2 paragraphs (PEE)

  • Extended writing

    Writing

    Write your answer to the lesson's big question in full: the strongest point on each side, then your own view with reasons and an example.

    250–350 words

  • Reading log

    Reading

    Find one news story this week that links to this lesson. Note the headline, where you read it, and how it connects.

    1 story, 4–5 sentences

  • Two sides of the argument

    Writing

    Write the strongest point for, the strongest point against, and then your own view with a reason.

    3 paragraphs

  • Poster or leaflet plan

    Diagram

    Plan a leaflet that explains this right or responsibility to someone your age, then photograph it.

    1 planned page

Saved as you type.

Part 1 of 18 · Watch & discover

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