# How much do you really make an hour?

## Once you factor in taxes, commuting costs and a load of other work-related expenses, how much are you actually getting for your hour’s hard graft?

When you take away all the expenses, how much do you actually make? (Image: Fotolia)

You may think you know how much you earn, but how much do you actually take home? The answer might come as a shock.

Last year, the median salary for a full-time worker was £26,244, according to the Annual Survey of Hours and Earnings from the Office for National Statistics.

So that’s around £505 a week for a worker in the very middle of the earnings scale. Assuming they work 37.5 hours a week, that’s a median hourly rate of £13.46.

That’s not bad when you consider that the minimum wage is £6.08, rising to £6.19 in October this year – it’s more than double.

But how much of that is actually for you and how much do you spend simply going to work?

Income tax

First thing to shave off the hourly rate is taxes. A basic-rate taxpayer will pay 20% on all earnings above £8,105, although you might have a higher personal allowance if you’re aged 65 or more.

That allowance equates to around 600 hours at £13.50, meaning you can work just over 11 hours a week without paying income tax. On earnings above that allowance, a median earner is paying £2.70 in tax, leaving them £10.80.

National insurance

Workers earning between £146 and £817 a week pay 12% per cent of the amount they earn.

So, at an hourly rate of £13.50, you can work for 11 hours a week before you start paying NI at a rate of £1.62.

After that, your hourly rate drops to £9.18, factoring in both tax and NI.

Commuting costs

If you didn’t go to work, you obviously wouldn’t have to pay for your petrol, train or bus, so that cost has to be factored into your hourly rate.

Commuting costs vary but Hay Group’s latest PayNet UK Salary Tracker reports that the average annual rail pass now costs £2,028.

In some parts of the UK, that’s 17% of the average annual salary spent simply getting to work.

So, that’s £39 a week, which knocks an extra £1.07 off that median hourly rate, bringing it down to £8.11. Of course, that’s a far higher proportion of your income if you earn less.

Pay as you earn

It costs a lot to go to work. Start adding up the costs and your hourly rate soon shrinks by a considerable amount. The median salary might be £26,244 but it’s just £15,873 once tax, NI and travel are factored in.

Of course, most people won’t earn that median rate, so it’s worth doing the sums yourself and finding out just how much you make in an hour.

Don’t forget to factor in additional personal costs such as lunches, work clothes and drinks bought on work nights out.

Making the most of your employer

Since it costs so much to get to work and keep the taxman happy, make sure you’re getting every benefit your employer offers, whether it’s free eye tests or free doughnuts.

If you have kids and your employer has signed up to the childcare voucher scheme then you could save more than £1,000 over a year. It works through salary sacrifice – you give up a portion of your earnings and agree to receive childcare vouchers instead.

That means you can pay for your childcare out of your pre-tax earnings, avoiding paying tax and NI on that cost.

Also, commuting costs are rising every year so make sure you highlight that when you’re negotiating for a pay rise. Some employers will offer interest-free loans to pay for an annual travel pass, as these can save employers hundreds of pounds compared to buying a daily or weekly ticket.

If you don’t buy an annual travel pass then you could also ask to work from home one or two days a week, to save money.

Some employers have signed up to the Cycle-to-work scheme. This allows employees to buy a tax-free bike to commute on, saving them around 32% of the cost – and cutting their travel costs completely.