EYU needed, manual correction calculations

Kamsi

Hi, Just to give you an overview an employee has received a bonus (of £7500 net amount) outside of payroll in Dec 18 but this was not recorded until Sept 19. I am having to do 2 x EYU for both tax years and I have to say I am unsure of my calculation.  Would someone be able to advise please if this is correct please.

18/19 tax year

P60 figures/Tax code 469L		Sumbitted		Correction
Gross Taxable pay		88832.36		100520.36
Tax deducted		26753.2		31432.14
Earnings at LEL		6032		6032
Earnings above LEL to PT		2392		2392
Earnings above PT to UEL		37926		37926
Employee NI		5400.77		5634.53
Employer NI(treshold 8424)	13.80%	11096.35		12709.3

[Deleted User]

The gross pay has increased by 11688. Tax has increased by 4679.14 and NI by 233.76 - total deductions of 4912.90 which increases the net pay by 6775? Unless there is some other variant I calculate that gross pay should increase by 12931 with increase in tax deducted of 5172.40 and NI 258.62. ( 12931 - 5172.40 - 258.62 = 7499.98). Employer’s NI should increase by 1784.47

Kamsi

[Deleted User] said:

The gross pay has increased by 11688. Tax has increased by 4679.14 and NI by 233.76 - total deductions of 4912.90 which increases the net pay by 6775? Unless there is some other variant I calculate that gross pay should increase by 12931 with increase in tax deducted of 5172.40 and NI 258.62. ( 12931 - 5172.40 - 258.62 = 7499.98). Employer’s NI should increase by 1784.47

No there isn't I wasn't sure how to calculate gross amount for the bonus in 18/19 tax year taking into consideration employee tax code. Can you tell me how did you calculate tax and ni having just net figure of the bonus please? 

[Deleted User]

I took your figures as described - you have increased gross pay by 11688 but the deductions have increased by 4912.90 with the result that the net pay has increased by 6775, not 7500. 

You can can ignore the tax code as the employee has utilised all tax free allowances Before any bonus is taken into account and any additional income would be at 40% tax rate and 2% NI rate. Total deductions on any additional amount would, therefore, be at 42%. The arithmetic calculation is 7500/ (100-42)% = 7500/58% = 12931.

Kamsi

Also the gross amount figure that you have used 12931 is the same amount which was actually put through payroll but in 19/20 tax year - why this is the same? Should this not be slightly different as tax code and threshold are different?

[Deleted User]

Kamsi said:

Also the gross amount figure that you have used 12931 is the same amount which was actually put through payroll but in 19/20 tax year - why this is the same? Should this not be slightly different as tax code and threshold are different?

No - it should be exactly the same. The tax code is irrelevant. The bonus would be ALL be taxed at 40% in both years and the additional NI would ALL be at 2%. You do see that the employee utilised all his or her personal allowances once he/she earned 4699?

Kamsi

purdyoaten2 said:

Kamsi said:

Also the gross amount figure that you have used 12931 is the same amount which was actually put through payroll but in 19/20 tax year - why this is the same? Should this not be slightly different as tax code and threshold are different?

No - it should be exactly the same. The tax code is irrelevant. The bonus would be ALL be taxed at 40% in both years and the additional NI would ALL be at 2%. You do see that the employee utilised all his or her personal allowances once he/she earned 4699?

Yes I do. But I cannot understand why bonus amount which was put through payroll in Sept 19 (which is in the wrong tax year) is the same amount...£12931.02 to be exact?

Kamsi

P60 figures/Tax code 469L		Sumbitted		Correction
Gross Taxable pay		88832.36		101763.36
Tax deducted		26753.2		28558.02
Earnings at LEL		6032		6032
Earnings above LEL to PT		2392		2392
Earnings above PT to UEL		37926		37926
Employee NI		5400		5895.27
Employer NI(treshold 8424)	13.80%	11096.35		12880.83
Net to Gross bonus amount paid in Dec 18 outside of payroll		12931		Net bonus amount	7500
Bonus to be added in 18/19

[Deleted User]

2018/19. Bonus 12931.02 Tax due at 40% is 5172.40. NI due at 2% is 258.62. Total deductions amount to 5431.02. Net pay increase of 7500. The employees tax code and basic rate band has already been utilised in the salary before bonus is applied.

2019/20 Bonus -12931.02 (minus). Tax due at 40% is -5172.40. NI due at 2% is -258.62. Total deductions amount to -5431.02. Net pay DEcrease of -7500.00. The employees tax code and basic rate band has already been utilised in the salary before bonus is removed.

I am am not sure why you cannot understand that 40% tax and 2% NI on 12931 would be the same in both years. For example: let’s say that the employee receives another bonus of 10000. The tax would be 4000 regardless of the tax code. Do you agree? 

unholyangel

Kamsi said:

purdyoaten2 said:

Kamsi said:

Also the gross amount figure that you have used 12931 is the same amount which was actually put through payroll but in 19/20 tax year - why this is the same? Should this not be slightly different as tax code and threshold are different?

No - it should be exactly the same. The tax code is irrelevant. The bonus would be ALL be taxed at 40% in both years and the additional NI would ALL be at 2%. You do see that the employee utilised all his or her personal allowances once he/she earned 4699?

Yes I do. But I cannot understand why bonus amount which was put through payroll in Sept 19 (which is in the wrong tax year) is the same amount...£12931.02 to be exact?

Respectfully, I don't think you do see it or you wouldn't still be asking the question of why it's the same.

To slightly rephrase what purdyoaten2 has said, it is the same amount because the rate of NI and income tax due on it is the same for both years. In both years they would be liable to 2% NIC and 40% income tax. 

Furthermore, there may be other issues to consider. Them having to complete a self assessment (if they don't already) or having an underpayment due to loss of personal allowance, if the don't have other reliefs/deductions to reduce their income below the 100k threshold. Not really your issue if just payroll but might be worth giving them a heads up in any event. 

[Deleted User]

unholyangel said:

Kamsi said:

purdyoaten2 said:

Kamsi said:

Also the gross amount figure that you have used 12931 is the same amount which was actually put through payroll but in 19/20 tax year - why this is the same? Should this not be slightly different as tax code and threshold are different?

No - it should be exactly the same. The tax code is irrelevant. The bonus would be ALL be taxed at 40% in both years and the additional NI would ALL be at 2%. You do see that the employee utilised all his or her personal allowances once he/she earned 4699?

Yes I do. But I cannot understand why bonus amount which was put through payroll in Sept 19 (which is in the wrong tax year) is the same amount...£12931.02 to be exact?

Respectfully, I don't think you do see it or you wouldn't still be asking the question of why it's the same.

To slightly rephrase what purdyoaten2 has said, it is the same amount because the rate of NI and income tax due on it is the same for both years. In both years they would be liable to 2% NIC and 40% income tax. 

Furthermore, there may be other issues to consider. Them having to complete a self assessment (if they don't already) or having an underpayment due to loss of personal allowance, if the don't have other reliefs/deductions to reduce their income below the 100k threshold. Not really your issue if just payroll but might be worth giving them a heads up in any event. 

Yes - I would have mentioned that but wasn’t sure how 2019/20 ended up - given the reduction of 12931 in that year.