Calculating Income Tax

osaddict

Before I make a muppet out of myself by asking obvious questions at work tomorrow I thought I'd ask on here...

To calculate how much income tax you think you should have paid on your wages at this point in time, is it as simple as:

Gross Pay TD - £7475 (personal allowance, not tax liable) = X

X is now the portion liable to tax. The first £35,000 of X is taxed at 20%, above £35,000 at 40% (and more if you're a super tax payer, I am not!).

I've taken a look at this and I'm getting a different result to what I actually have paid thus far (lower)...am I calculating this incorrectly, are there things I'm not taking into consideration?

Any pointers much appreciated!

YorkshireBoy

Other things influence how much tax you pay:

Are you carrying an under or overpayment from the previous tax year?

Any additional allowances, such as 'flat rate expenses' for example?

Do you pay into a defined benefit company pension scheme?

osaddict

I don't think I am, tbh I didn't check last year, or if I did I don't remember. I've certainly not been chased up on it or anything.

I do pay into a pension scheme, it's one of those stakeholder ones though. No other allowances, student loans, sick pay, expenses for anything. The only thing I can think of is my pay can fluctuate if the odd bonus is given here and there.

I'll just hassle the finance guy tomorrow and see what he reckons.

Mikeyorks

The £7475 is the personal allowance (PA) for the full year / the £35k also applies to the full year - which is why your calculations don't work. You have to apportion.

The PA is allocated on a monthly basis at £7475 / 12 = £623pm. So you multiply the £623 by the current Month number (Month 10 for end Jan) and then subtract the resulting £6230 from taxable pay.

If you're earning over £42475 in the full year - then you equally have to divide up the £35k band by 12 and allocate it monthly. Otherwise you can simply take 'Taxable gross pay' less 'PA to date' and multiply by 20% for tax due to date?

Most of the calculators you find online don't work for in year calculations - only at the end of a year. The HMRC one I believe is the exception :

http://payecalculator.hmrc.gov.uk/PAYE0.aspx

BoGoF

You're way off the mark I'm afraid. Assuming you were only entitled to the personal allowance this is divided up depending on your pay frequency. For example if you are monthly paid you can earn £622 a month (£7475/12) before paying tax. The end of January is month 10 of the tax year so up to then your cumulative tax free amount is £6220 (10 x £622).

The basic rate band is similarly divided up.

ps you've posted on the wrong board.

BoGoF

Beat me to it Mikey - I rounded down

osaddict

Ahh, of course, that makes perfect sense, and without the spreadsheet in front of me I'd say that would probably account for most if not all of the difference, I'll apply that logic to what I have tomorrow. Thanks for the tips there guys.

As for wrong forum, yeah, I did look for a while and deliberate where to place this. I considered cutting tax but that's not what I'm trying to do! - I just want to work it out, not minimise it. I guess I thought budgeting because I was looking into this and a few other things at the same time.

At any rate, a thank you again for pointing out something I should have considered, d'oh!