What's the difference between Gross pay and Net pay?
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Gross pay refers to the amount of money your employer pays you before any deductions are made.

Your annual Gross pay is what’s referred to as your salary – this is what you get paid each year – the amount that appears on your employment contract. Your Gross monthly pay is the amount you get paid each month before you pay tax etc. This can sometimes include things like bonuses and overtime and anything that you might get paid on top of your monthly salary.

Examples of Gross pay are: salary, wages, overtime, bonuses, sick pay, commission, holiday pay and loans or advances.

Net pay refers to the amount of money your employer pays you after deductions for tax and National Insurance. This is often referred as your “take home” pay.

Examples of deductions that will come off your Gross pay to form your Net pay are: tax, National Insurance, Student Loan repayments and pension contributions.

For info – some parts of your income are subject to tax and National Insurance, some are only subject to tax but not National Insurance and vice versa and some things, such as expenses, are not subject to Tax or National Insurance and are paid tax free.

Some parts of your pay, such as Auto Enrolment Pension contributions are subject to tax relief – more about this here.

Different types of pensions have tax relief applied in different ways – you can read more about this here under the tax relief section

For general information about tax relief, you can read about it here in our Jargon Buster section.

Roisin Gray

Posted on Monday 24 Oct, 2016, 4 years ago

April 18, 2018

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