The home working allowance will be of interest to employees who work from home.
Flexible working is becoming the new normal in the face of long, busy commutes, more working mums, and a push for a better work life balance.
But when you work at home you are spending your own money on electricity, gas, energy, water and telephone bills. Yet these costs are being incurred for a business purpose.
If home working is specified as part of your job then you qualify. If it isn’t specified then you need to get a home-working agreement with your employer to qualify.
If you qualify then your employer can contribute towards the expenses listed earlier – £4.00 per week or more if you can show that you had to spend more than that. However, if your employer doesn’t contribute you cannot claim the allowance.
Importantly for the employee, the money you receive from your employer is tax free. You won’t have to pay income tax or national insurance contributions on the amount you get from your employer.
For more information read the government’s working from home guidelines.
Try our PAYE calculator to calculate your earnings after tax.
PAYE is an acronym for Pay As You Earn. It is a system that the tax man uses to collect an employee’s income tax and national insurance contributions.
The employer calculates these taxes as part of a normal payroll process. The employer deducts the tax from the employee’s pay and sends the tax directly to HMRC.
PAYE is a withholding tax whereby an employer withholds income tax and NICs.
The national minimum wage is the hourly rate of pay that almost every worker in the UK is legally entitled to as an absolute minimum.
It is the law in the UK that every employer must pay its workers at least the minimum wage although minimum wage rates of pay vary depending upon an employee’s age.
For the most up to date statistics, the government publishes its list of national minimum wage rates.
The national minimum wage act 1988 introduced the minimum wage into UK law. The first rate, set in April 1999, was £3.60 per hour for 22 year olds and over and £3.00 per hour for 18 – 21 year olds.
The concept of a minimum wage is applied globally with many countries having their own – see this list of minimum wages by country.
The national minimum wage is different from the living wage. The living wage is tied to the cost of living by the Living Wage Foundation.
There are two Living Wages:
- The Living Wage
- The National Living Wage
The Living Wage is calculated according to the cost of living and is set by the Living Wage Foundation. Whereas the government sets the National Living Wage and it is a rate based on median earnings.
The Living Wage
The Living Wage is an hourly wage rate that an employer may voluntarily pay its employees.
The Living Wage is calculated based on the basic cost of living in the UK, is set independently by the Living Wage Foundation and is reviewed on an annual basis.
Because the cost of living in London is relatively high compared to the rest of the UK there is also a London Living Wage in addition to the UK Living Wage.
Click for the current UK Living Wage and current London Living Wage.
The National Living Wage
The National Living Wage is not voluntary as it is set by the UK government. For all staff over 25 years old in the UK, employers are obliged to pay a minimum wage premium called the National Living Wage.
The scheme was introduced in April 2016 and the government has set a target for the Low Pay Commission. By 2020, the minimum wage premium for employees aged over 25 should be 60% of median earnings.
Your pay packet has a hidden story to it. Use our net pay calculator to understand the story behind your pay.
The word “net” implies a reduction. This is the case with net pay, in which your pay has been reduced.
Net pay is the pay you receive from your employer post deductions for taxes. The two common taxes that are deducted from your pay packet are:
Rather than HMRC relying on you to self declare these taxes they oblige the employer to do the calculations and make payments on your behalf.
Use our net salary calculator to see what deductions are being made from your pay packet.
Find out how much is really in your wage packet with our wage calculator.
You work hard all week and at the end of it you get your wages. Seems like a fair, transparent agreement between an employer and an employee.
Your wage or wages is exactly that, a regular payment for work or services, normally paid on a daily or weekly basis.
Before you head off down the pub to spend your wages, have you ever considered how exactly your wages are calculated? Even though you agree a wage with your employer of say £400 per week, you will probably only get £300 at the end of the week.
Where does the other £100 go?
There is a third party in the agreement who doesn’t get a mention at the beginning of the work. The tax man!
HMRC hoovers up the other £100. It’s your employer’s responsibility to pay HMRC your income tax and national insurance contributions on your behalf. They do this through the Pay As You Earn system.
Experiment with your wages and use our wage calculator to see what the tax man takes out of your wage packet.
Take home pay calculator will calculate your take home pay using our salary calculator. Enter your salary above.
Take home pay is the money you, as an employee, receive in your bank account each payroll period. The payroll period for most employees is typically weekly or monthly.
So why does your take home pay feel so much lower than your headline salary?
The short answer is it is lower.
Your employer subtracts a number of deductions from your salary to get to your take home pay.
These deductions include taxes such as income tax and national insurance contributions.
If you have recently been in full time education you may have student loan deductions that come out of your salary too.
Another example is if your employer provides you with an employee loan. Any repayments of that loan will be a deduction from your salary.
The take home point or the take away point is the most important point to note. It’s no different with your take home pay which is the money you actually get paid after all deductions.
Calculate your take home pay with our take home pay calculator.
Our net salary calculator will calculate your net salary but what is net salary?
First we need to understand gross salary.
Gross salary is the total salary an employer has contractually agreed to pay an employee.
But an employee owes HMRC a chunk of their salary for both income tax and national insurance contributions.
Net salary is calculated when income tax and national insurance contributions have been deducted from the gross salary.
An employer subtracts these taxes from the gross salary as part of its payroll calculations. Through a system called Pay As You Earn (PAYE) the employer then remits the tax directly to HMRC on behalf of the employee.
Use our net pay calculator to calculate your net income.