Further Payslip Help Required - Deductions do not "Add Up"!

Cmdr_Bond

I am pretty good with math and reasonable with excel (other spreadsheets are available) and have, after 6 years, decided to analyse my pay.

Whilst it all seems pretty much OK, my calculations are falling outside of those that the company is making.. albeit by a few pence.

Where am I going wrong?

Tax
Personal Allowance = £10,600 = £203.8461538/Week - Obviously this will round and vary slightly from week to week.
Basic Rate (20%) on the first £31,785 = £611.25/Week
Higher Rate (40%) thereafter.

National Insurance
Primary Threshold = £155/Week
Upper Earnings Limit = £815/Week = up to £660 taxable at 12%.
Over this at taxed at 2%

So with those figures in mind...

Week 1

Gross/Gross for Tax - £567.10 - Earnings for NI - £567.00
Tax Deducted - £72.60 - NI Deducted - £49.50

If I do the calculations I get

Tax = (£567.10-£203.85)*20% = £72.65, a difference of +£0.05.
Working backwards, £567.10-((£72.60/20)*100) = £204.10.

I can cope with the difference on the personal allowance due to the rounding needed, and will see how that pans out over the coming year.

NI = (£567.00-£155)*12% = £49.44, a difference of -£0.06.
Working backwards, £567.00-((£49.50/12)*100) = £154.50.

This is the one that puzzles me, apart from the fact that "Earnings for NI" seem to round down to the nearest whole pound, it is the anomaly in how the primary threshold works out.

Using the same calculations, here are the following 3 weeks...


Week 2

Gross/Gross for Tax - £726.31 - Earnings for NI - £726.00
Tax Deducted - £104.40 - NI Deducted - £68.58

Tax = (£726.31-£203.85)*20% = £104.49, a difference of +£0.09.
Working backwards, £726.31-((£104.40/20)*100) = £204.31.

NI = (£726.00-£155)*12% = £68.52, a difference of -£0.06.
Working backwards, £726.00-((£68.58/12)*100) = £154.50.


Week 3

Gross/Gross for Tax - £590.59 - Earnings for NI - £590.00
Tax Deducted - £77.20 - NI Deducted - £52.26

Tax = (£590.59-£203.85)*20% = £77.35, a difference of +£0.15.
Working backwards, £590.59-((£77.20/20)*100) = £204.59.

NI = (£590.00-£155)*12% = £52.20, a difference of -£0.06.
Working backwards, £590.00-((£52.26/12)*100) = £154.50.


Week 4

Gross/Gross for Tax - £828.49 - Earnings for NI - £815.00
Tax Deducted - £125.00 - NI Deducted - £79.46

Tax = (£828.49-£203.85)*20% = £124.93, a difference of -£0.07.
Working backwards, £828.49-((£125.00/20)*100) = £203.49.
NB: I have not calculated for the higher tax band as the average weekly wage is still below the threshold.

NI = ((£815.00-£155)*12%)+((£828.00-£815.00)*2%) = £79.46.
Working that backwards is a more difficult, and I can't concentrate on it right now - but I don't really need to as the numbers, in this case, match.


So as I said above, I am less worried about the tax anomaly as it doesn't divide exactly. What bothers me is the difference (albeit tiny) in the NI.

chrisbur

Regarding the NI I have explained that on your other thread.

Regarding tax it is not worked out on each separate week. A figure is calculated each week for the total tax due at that week and tax paid so far is deducted to give the tax due that week. The figure used ignores any pence so if say at week 2 you have earned 501.75 tax is calculated on 501 the tax you paid for week 1 is deducted and what remains is the tax due for week 2.
Also the tax allowance given is slightly higher than you have worked out on a code of 1060L by the end of the tax year a weekly paid employee will have been given a tax allowance of 10610.08 (204.04 a week)
Examples from your figures....
Week 1 567.10 less 204.04 is 363.06 Ignore the pence so 363 at 20% is 72.60
week 2 726.31 gives 1293.41 to date less 408.08 is 885.33 Ignore the pence so 885 at 20% is 177 less 72.60 paid gives 104.40
and so on....

Cmdr_Bond

Thanks. I based my figures on HMRC's website. But I won't argue if they are giving me more.

However, I am struggling to understand how the tax is calculated based on your description...

Are you saying that as each week passes, tac is calculated on the "year to date" total minus "tax paid to date"?

CLAPTON

Cmdr_Bond wrote: »

Thanks. I based my figures on HMRC's website. But I won't argue if they are giving me more.

However, I am struggling to understand how the tax is calculated based on your description...

Are you saying that as each week passes, tac is calculated on the "year to date" total minus "tax paid to date"?

yes, tax (not NI) is an annual tax but charged according to your pay period

so yes they work out the tax due to date (from 6th Apri) and then deduct what you have already paid.

this means (assuming your tax code is correct and set to cumulative) that tax self corrects if e.g. to get a large bonus one month or low earnings etc and so by year end the tax is correct.

Cmdr_Bond

Excellent.

Thank you.

Cmdr_Bond

I have 1 final question, the calculations work out to what I am being deducted, so this is good.

But where does the figure of 204.04 come from?

I can't find anything online except that the personal allowance is £10,600.

chrisbur

From the Pay Adjustment Tables ay....
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/409168/Tables_A__2014.pdf

On page 4 bottom right. You need two lots of 96.16 and add the figure for 60 from the chart. This gives the weekly tax free allowance for 1060L.

Cmdr_Bond

Thank you.