Tax deductions on lump sum

Skint_yet_Again

I have just discovered the MSE tax calculator

Total income £135980.49 (tax allowance nil)

I calculated tax due

37700 x 20%=£7,540.00

87440 x 40%=34,976

10840 x 45% =4,878

Total £47394

MSE says

Earn £135,980 in 2026/27 …

Over the year you'll pay £47,394 income tax

molerat

For how much tax PAYE will deduct I have made up a spreadsheet based on the HMRC manual tax tables https://assets.publishing.service.gov.uk/media/69a05a803e672177d0bc773f/Tax_Tables_B-D_2026_to_2027.pdf

To use that with a tax code you need the pay adjustment table to get the correct tax free amounts https://assets.publishing.service.gov.uk/media/5c7fde8be5274a3f90f75580/Tables_A_Pay_adjustment.pdf

The figures used in the PAYE tables are rounded month to month but M12 squares it all.

peteuk

https://forums.moneysavingexpert.com/discussion/comment/82073743#Comment_82073743

Without knowing your yearly income we are unable to calculate the tax. I think what’s getting mixed up is the amount taxable v amount earned. If you google tax bracket it notes that anything above £50,270 is taxed at 40%, but the actual amount taxed is dependant on your tax code.

Your tax code 1257L will give you a tax allowance of £12,571.00. If you are earning above this in the year, it will be applied to you wage.

Anything between £12,571.00 and £50,270.00 is taxed at 20%.

For example if you earn £25,000.00. The first £12,571 is tax free, the next £12,429 is taxed at 20% (£2,485.80 tax paid)

When you get the £60,000 lump sum. It may be emergency taxed, or it will be added to your income for tax purposes. So your years income is now £85,000.00.

Tax free - £12,571

20% - £12,571 to £50,270 - £37,699.00 (£7,539.80 tax paid)

40% - £50,270 to £85,000.00 - £34,730.00 (£13,892.00 tax paid)

Total tax paid - £21,431.80

Estimated tax on lump sum - £18,946.00

Bobziz

And if you plug that income into Gemini or Copilot you'll get the same result.

Skint_yet_Again

So the lump sum is one-off £60000 and total income including salary will be £135980.49

I am told there is no other income or interest or deductions. The tax allowance due will be nil

Is there a tax calculator I can use online? Is there a problem with the MSE calculator?
Thanks for your help

https://forums.moneysavingexpert.com/discussion/comment/82073828#Comment_82073828

chrisbur

The best tax calculator available is the one supplied by HMRC here….

https://www.tax.service.gov.uk/guidance/paye-tax-calculator/start/tax-code

This will give you exactly the same answer as your employer's payroll will give you as both use the same method of calculation.

For £60000 on tax code 1257L non-cumulative (shown as X) you will get a tax figure of £25378.20

That assumes that your employer pays only £60000 taxable gross for that tax month and no other payments.

That does not mean that it is the correct tax figure that you will end up owing at the end of the tax year on the £60000 taxable pay that falls above the rest of your taxable pay. At the year end HMRC will calculate what you owe and compare that with what you paid. If your tax code remains 1257L non.cumulative then there will be some sort of adjustment to be made. It is possible that to get a closer tax paid figure to what will be due HMRC may ammend your tax code during the currant tax year.

Skint_yet_Again

https://forums.moneysavingexpert.com/discussion/comment/82073908#Comment_82073908

Thank you @chrisbur I am pleased to see the gov.uk calculator agrees my figures within a few pence

For £60000 on tax code 1257L non-cumulative (shown as X) you will get a tax figure of £25378.20

£60000-1047.5 =£58,952.50

3142 x 20% =628.4

On next 7287 x 40% =2,914.8

On next 48523 x 45% =21,835.35

Total = 25378.55

DRS1

https://forums.moneysavingexpert.com/discussion/comment/82073812#Comment_82073812

Finally the penny has dropped (with me that is).

At least I can be comforted by AI being wrong (again).