Hi, I'm Mrs. Wheelhouse, and welcome to our series of lessons on maths and personal finance.

I'm really excited to look at this with you, so let's get started.

By the end of today's lesson, you'll be able to estimate and calculate take home pay for different occupations and for people in different circumstances.

On the screen, you can see some keywords that we'll be using today.

Now they should be familiar to you, but if they're not, feel free to pause the video while you have a read through their definitions.

Here's some new words we're introducing today.

Your gross pay is your total income before any deductions are made, and your net pay is the amount of income that you receive after deductions have been made.

We're gonna be using these today in our lesson, so look out for them.

Our lesson is broken into two parts and we're gonna begin by calculating your net pay.

The diagram shows a payslip for someone who is paid monthly.

The left side provides a breakdown of their pay for this month.

The right provides a breakdown for the financial year so far.

In this case, the employee does not receive all of the money that they have earned during the month.

Some of their pay has been deducted for pension, income tax, and national insurance.

Their gross pay is their total income before any deductions.

Their net pay is their income after deductions.

This is how much money the employee actually receives.

We can refer to this as their take home pay.

Pension contributions can differ between different jobs.

In 2024, the minimum pension contribution for an employee was 5% of their gross pay.

For example, an employee's monthly gross pay is 2,070 pounds.

Their pension contribution is 5% of their gross pay.

How much is their pension contribution? Pause the video and have a think about this now.

Well, 5% of 2,070 pounds is 103 pounds and 50 pence.

Now national insurance and income tax is calculated based on the remaining income after pension contributions have been deducted.

This is sometimes referred to as taxable income.

For example, an employee's monthly gross pay is 2,070 pounds.

103 pounds and 50 pence is deducted from their pay for their pension contribution.

What is their remaining taxable income after their pension contribution has been deducted? Pause the video and have a think about this now.

Well, if we subtract the pension amount, we're left with 1,966 pounds and 50 pence.

National insurance contributions differ depending on the amount of taxable income.

The table shows the national insurance rates for 2024 to 2025 according to gov.

uk.

The information can also be represented visually with a diagram.

Calculate the monthly national insurance contribution based on the information provided.

Pause and do this now.

Well, let's look at where the 1,966 pounds and 50 pence is on our chart.

So up to 1,048 pounds a month, you pay no national insurance, but it's the remaining amount that we do pay some for.

Well, that means the national insurance contribution is calculated on that 918 pounds and 50 pence.

Well, 8% of that is 73 and 48 pence.

So the total national insurance contribution would be 73 pounds and 48 pence.

The amount paid for income tax differs depending on the amount of taxable income, and this table shows the income tax rates for 2024 to 2025, according to gov.

uk.

The rates are based on annual income.

It can be tricky to calculate the exact amount for each month because your pay may change during the year.

We can estimate monthly amounts of income tax by dividing the thresholds by 12.

So now we've updated our table, so it's showing taxable income per month.

The first two thresholds are the same as national insurance, but with different rates.

So let's work out how much income tax we need to pay.

If you want to, you can pause the video and have a go at this yourself first.

Let's go through it.

Remember, the first 1,048 pounds is not taxed.

It's the remaining amount that is.

Well, that means that we are paying tax on 918 pounds and 50 pence and it's at a 20% rate.

Well, 20% of that value is 183 and 70 pence.

So the total amount of income tax this person needs to pay is 183 pounds and 70 pence.

An employee's net pay is their total income after deductions, and this is how much money they actually receive.

We can use the information below to calculate the employee's net pay.

Remember, we've got their gross pay and we need to deal with those deductions.

So our total deductions are 360 pounds and 68 pence.

So we take that away from our gross pay and that's how we calculate our net pay.

It's time to do a check now.

The diagram shows part of an employee's monthly payslip.

They worked 160 hours and were paid 33 pounds, 50 pence per hour.

Calculate their gross pay for this month.

Pause the video and do this now.

In order to calculate it, we had to do the rate multiplied by the number of hours worked.

This gives us a total gross pay of 5,360 pounds.

The pension contribution is 5% of their gross pay.

Pause the video while you calculate the pension contribution for this month.

Welcome back.

You should have found that the pension contribution was 268 pounds.

We've now got to calculate national insurance and income tax.

Please calculate the taxable income first of all for this month.

Pause the video and do this now.

So the gross pay of 5,360 pounds, subtract the pension payment of 268 pounds, leaves us with a taxable income of 5,092 pounds.

The diagram shows the national insurance thresholds and rates.

The employee has 5,092 pounds taxable income.

How much of this taxable income is taxed at 8%? Pause the video and work this out now.

Well, you should have worked out that the first 1,048 pounds was tax free, which means we have a remaining amount of 3,141 pounds that falls in the 8% bracket.

How much is therefore taxed at 2%? Pause video and work this out now.

You should have written down 903 pounds.

Now using that information, please calculate the national insurance contribution.

Pause the video while you do this.

Welcome back.

Well, the first 1,048 pounds was tax free, so no contribution there.

8% of 3,141 pounds is 251 pounds, 28 pence, and then 2% of 903 pounds is 18 pounds and six pence.

When we sum that, we get a total national insurance contribution of 269 pounds, 34 pence.

Well done if you got that.

Now the diagram shows the income tax thresholds and rates.

Please estimate the amount of income tax that's paid by the employee for this month.

Pause the video and do this now.

Welcome back, let's see what you put.

Remember, the first 1,048 pounds is tax free.

Then we have 20% of 3,141 pounds and 40% of the 903 pounds.

When we've calculated those values, we can then sum them to get a total income tax payment of 989 pounds and 40 pence.

We now need to calculate this month's net pay.

Pause the video while you have a go at this now.

Welcome back.

Well, the total deductions came to 1,526 pounds and 74 pence.

This gives the employee a net pay of 3,833 pounds and 26 pence.

Well done if you got that.

It's now time for your first task.

For question one, use the information provided to fill in the blanks in each payslip.

Pause the video while you do this for payslip A now.

Now use the information provided to fill in the blanks for payslip B Pause the video and do this now.

Now use the information provided to fill in the blanks for payslip C.

Pause and do this now.

Welcome back, it's time to go through the answers.

Now you can see where I filled in the values for payslip A.

I suggest you pause the video and check my values against yours.

Do this now.

Now we have payslip B.

Again, pause the video while you check the values on the screen against your own.

And now payslip C.

Again, pause the video so you can check.

Well done.

It's now time for the second part of our lesson and that's checking that you have paid the correct tax.

In many cases, employees do not need to calculate their net pay for themselves.

All deductions are usually calculated and made before they receive their payslip.

There are some cases though, where it can be helpful for workers to check that they have paid the correct amounts in taxes for the year.

Some examples of people who are self-employed or freelance or people with multiple jobs.

People who have underpaid may need to pay what they owe or have it deducted in the following financial year.

People who have overpaid may be able to claim a refund.

Let's consider this example.

A worker has two jobs at the end of the financial year.

They check their payslips to see whether they have paid the correct amount of income tax.

Their total gross pay from their two jobs is 54,000 pounds.

Their pension contribution is 5% of each job, and they have paid 8,712 pounds in income tax in total.

So have they paid the correct amount? Let's find out.

Aisha says, "Well, we're gonna work out how much income tax they should expect to pay and compare it." It's a good idea, Aisha.

The total gross pay was 54,000 pounds.

There was a 5% pension contribution and the income tax paid was 8,712 pounds.

The taxable income was therefore 51,300 pounds.

So let's consider the expected amount of income tax.

Well, the amount taxed at 20% would be 37,700, and the amount taxed at 40% would be 1,030 pounds.

Well, we can calculate the 20% of 37,700 pounds, and that's 7,540, and then the 40% is 412 pounds.

So when we sum that together, the total income tax amount we've estimated is 7,952 pounds.

Wait a second, have you seen the difference there? They have definitely overpaid this financial year by over 700 pounds.

They definitely wanna get that money back.

Let's do a quick check.

At the end of a financial year, a self-employed worker checks whether they have paid the correct amount of income tax.

Their total gross pay was 35,800 pounds for this financial year.

Their pension contribution was 5%.

So far for this financial year, they have paid 3,900 pounds of income tax.

So my first question is, what was their taxable income? Pause the video while you work this out now.

Welcome back.

Well, we need to work out what the taxable income is.

That means we want 95% of 35,800 pounds, which is 34,010 pounds.

So we now know what the taxable income was.

Remember, so far this financial year, they have paid 3,900 pounds of income tax.

Could you please pause the video and calculate if they've paid the correct amount or not? Do this now.

Welcome back, well, let's work out if they have.

The amount they'll be paying 20% on is 21,440 pounds, and 20% of that is 4,288 pounds.

So no, they haven't, they've underpaid by 388 pounds.

It's now time for your final task.

Question one.

Each question shows the gross pay and the amount of income tax paid by three workers by the end of the financial year.

For each one, determine whether they have paid the correct amount of income tax.

If not, state the difference.

Pause the video while you work on this now.

Welcome back.

Let's go through the answers.

Well, for part A, the taxable income was 12,521 pounds, which is below the threshold.

So they didn't pay any income tax and that was correct.

Part B, the taxable income was 24,510 pounds.

Now remember, they pay 20% of the amount in excess of 12,570 that they earn that year.

So they're paying 20% of 11,940 pounds, which is 2,388 pounds of income tax.

So in fact, they've overpaid by 43 pounds and 20 pence.

Part C, they get a taxable income of 55,500 pounds.

They've got to pay 20% on 37,700 pounds worth and 40% on 5,230 pounds.

This gives a total income tax amount of 9,632 pounds, which means that this employee has underpaid by 151 pounds.

Well done if you've got that all right.

It's now time to sum up what we've looked at today.

Your gross pay is your total income before any deductions are made.

Your net pay is the amount of income that you receive after deductions have been made.

People in different circumstances will have different levels of deductions or allowances and payslips should be checked to ensure that deductions are correct.

Well done, you've worked really well today.

I look forward to seeing you for future lessons.

Goodbye for now.