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PAYE, NI TAX Calculation explanation

2

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  • chrisbur
    chrisbur Posts: 4,196 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    edited 7 June 2023 at 9:33AM
    For NI you get an allowance each payday before NI is due which for anyone on 4 weekly is £967
    So paydays one and two under threshold so nothing to pay and payday 3 is 2013.04 less 967 is 1046.04 on which you pay 12% which is £125.52 
    Tax is done different to NI here your tax is calculated each month on your earnings so far that year.  You get an annual allowance for your tax code of £12579.84 so for period 3 this is £2903.04
    As advised earlier the calculation is then....
    Add on taxable to date from last payslip so 2013.04 plus 1540.76 gives 3553.82
    Deduct tax allowance for week 12 (third 4 weekly payment) of 2903.04 gives 650.78
    Tax is due on full pounds only so ignore the pence and 20% of 650 is £130
    As allowance for periods one and two were less then the earnings no tax was deducted but the earnings were carried forward so that period three tax was calculated on earnings of periods one two and three.
    RE c)  NI allowance each period £967  ( As advised earlier ....
    "The only explanation I can think of is that the figures are based on the annual figure £12570  and then rounded up to the next pound.
    So weekly as 1/52 is 241.73  gives 242
    Two weekly 2/52 is 483.46 gives 484
    Four weekly 4/52 is 966.92 so 967   (Not the 968 one would expect from 4 times the weekly figure)
    Monthly 1/12 is 1047.50 so 1048")
    Tax allowance comes from HMRC Table A (chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/783933/Tables_A_Pay_adjustment.pdf) using the weekly tables for weeks 4,8,12,16  etc.
    As a quick rule of thumb, take the tax code ignore any letter on the end and put a 9 on the end. This is roughly the annual figure so divide by 52 and multiply by the week number on the payslip this gives your year to date allowance.  Take that away from taxable pay to date and divide the pounds by 5, as you are well within the 20% tax band, to give tax due to date.  Take away tax already paid and you get the tax for that payday.
    I would also advise again that your tax will be higher next payday if earnings are the same as tax for period 3 is reduced by unused tax allowance carried forward from periods one and two.

  • mazibee
    mazibee Posts: 440 Forumite
    Ninth Anniversary 100 Posts Name Dropper Combo Breaker
    @chrisbur
    Extremely thankful for your valuable time and explanation.

    All clear except, how you arrived at the figure if 12579.84

    Tax code is 1257L, I ignored the letter L and added the 9 so it became 12579, but a query, why you have used 12579.84 instead of 12579

    Rest all is cleared.

    Yes you are right I expect the same Gross i.e 2013.04 for the current period
    I have calculated 

    PAYE Calculation Period 4
    (3553.82+2013.04 = 5566.86 less allowance (3780.72) = 1696.14 x 20% = 339.28 rounded gives £339 of PAYE

    NI Calculation Period 4
    (2013.04 - 967 = 1046.04 x 12% = £125.42

    I hope that i have done the calculation right

    Sorry for bothering as one query as to why there is deduction of £63.88 made but there is no deduction no deduction of Employee Pension in the Period 3  (something related to Smart Salary Sacrifice)

    Thanks in advance.
  • [Deleted User]
    [Deleted User] Posts: 0 Newbie
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    edited 7 June 2023 at 5:10PM
    mazibee said:
    @chrisbur
    Extremely thankful for your valuable time and explanation.

    All clear except, how you arrived at the figure if 12579.84

    Tax code is 1257L, I ignored the letter L and added the 9 so it became 12579, but a query, why you have used 12579.84 instead of 12579

    Rest all is cleared.

    Yes you are right I expect the same Gross i.e 2013.04 for the current period
    I have calculated 

    PAYE Calculation Period 4
    (3553.82+2013.04 = 5566.86 less allowance (3780.72) = 1696.14 x 20% = 339.28 rounded gives £339 of PAYE

    NI Calculation Period 4
    (2013.04 - 967 = 1046.04 x 12% = £125.42

    I hope that i have done the calculation right

    Sorry for bothering as one query as to why there is deduction of £63.88 made but there is no deduction no deduction of Employee Pension in the Period 3  (something related to Smart Salary Sacrifice)

    Thanks in advance.
    Back to the days of my tax exams! The code is 1257L. The tax tables attached only go up to 500. Accordingly we need to break it down into 500 + 500 + 257. 

    500 converts to 5000 of personal allowance or £96.16 per week. 

    257 converts to 2570 of allowances or 49.60 per week. 

    Add £96.16 to £96.16 to £49.60 and we get £241.92 total allowances each week.



    Multiply by 52 and we have £12579.84.

    PAYE was only computerised in 1985 - everything was calculated manually prior to this using these tables.

    https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/783933/Tables_A_Pay_adjustment.pdf
  • chrisbur
    chrisbur Posts: 4,196 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper

    mazibee said:


    PAYE Calculation Period 4
    (3553.82+2013.04 = 5566.86 less allowance (3780.72) = 1696.14 x 20% = 339.28 rounded gives £339 of PAYE

    NI Calculation Period 4
    (2013.04 - 967 = 1046.04 x 12% = £125.42

    I hope that i have done the calculation right

    Sorry for bothering as one query as to why there is deduction of £63.88 made but there is no deduction no deduction of Employee Pension in the Period 3  (something related to Smart Salary Sacrifice)

    Thanks in advance.

    PAYE Calculation Period 4
    (3553.82+2013.04 = 5566.86 less allowance (3780.72) = 1696.14 
    3780.72 should be 3870.72 just a mis-type I think as the 1696.14 is correct.
    You then ignore the pence so 20% of 1696 is £339.20  less the £130 from last pay period gives £209.20 tax for period 4
    NI Calculation Period 4
    (2013.04 - 967 = 1046.04 x 12% = £125.42  
    12% of 1046.04 is £125.52

    Any questions regarding the pension figures need to be put to the payroll dept. All I can tell is that the method of deduction is different for period 3 (salary sacrifice) compared to period one and two ( deducted from net pay)
  • mazibee
    mazibee Posts: 440 Forumite
    Ninth Anniversary 100 Posts Name Dropper Combo Breaker
    edited 22 January 2024 at 2:51PM

    Extremely thankful
    for clearing my concepts.
  • mark55man
    mark55man Posts: 8,141 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    OP has had a masterclass.  I thought I knew this stiff bit the computerisation by modelling the use of tax tables only going up to £500 made me nostalgic 

    Thanks all
    I think I saw you in an ice cream parlour
    Drinking milk shakes, cold and long
    Smiling and waving and looking so fine
  • mazibee
    mazibee Posts: 440 Forumite
    Ninth Anniversary 100 Posts Name Dropper Combo Breaker
    Hi Everyone,

    Sorry for bothering again.

    Please can someone help me with the pension calculation in the screen shot below:

    The pension deduction is £63.88  I have confirmed that it is 4% 


    Thanks in advance.
  • sheramber
    sheramber Posts: 20,914 Forumite
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    Have you asked your payroll department as suggested above?
  • chrisbur
    chrisbur Posts: 4,196 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    Have a look at your contract.
    £63.88 is 4% of £1597
    Is this figure mentioned anywhere eg Your pensionable salary is £1597 every four weeks and in addition you will recieve ...........
    Other than that you will have to ask payroll what the 4% is based on.
  • uknick
    uknick Posts: 1,726 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    What sort of pension is it?  If it's a true SMART pension then the amount deducted is based on an amount less than your actual salary.  The 4% is taken from this net amount.

    This has more information

    Pensionable earnings | Smart Pension Support (autoenrolment.co.uk)

    But, as mentioned a few times you'll need to talk to HR/payroll to get the thresholds pertinent to your scheme.
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