Member Article

Do you understand your payslip? If not, you’re not alone

As a freelance or contract worker, understanding your payslip is essential. Without a basic understanding of how your pay is calculated, what type of tax or expenses you are eligible for and what type of deductions are being taken out, you may be at risk of losing money or even HMRC fines.

Recent research shows that more than half (56.5%) of freelancers in the UK do not understand their payslips – that equates to over 900,000 freelancers. This statistic is both shocking and completely avoidable as employers in the UK should provide their workers with an easy-to-read payslip.

The main reasons why freelancers couldn’t understand their payslips were that they didn’t feel it was their responsibility to understand them and they struggled to comprehend tax codes. However, understanding payslips is actually more important than most respondents believed, as the same research found that more than one third (37%) of freelancers said they had received a HMRC fine or penalty and more than half (55%) stated that they struggled to understand HMRC guidelines.

Ultimately, freelancers are directly responsible for the accurate recording of their financial data and when it comes to the law, ignorance is not an excuse accepted by the HMRC. If an error occurs and back taxes are due, the tax man will look for the individual, not the employer.

In order to combat this, it’s imperative that you demand an easy-to-read payslip from your employer. If it doesn’t make sense or you are struggling to understand your payslip, you must speak with your employer immediately. Alternatively, many freelancers hire a neutral third-party who helps to manage their pay, taxes and any expense claims. Moving forward, burying your head in the sand is not a feasible option – the time to get to grips with your payslip is now.

This was posted in Bdaily's Members' News section by Paraplus .