About The Tax Calculator
The Tax Calculator uses the UK Government's tax information from the April 2013 budget to calculate the income tax, National Insurance Contributions and Student Loan repayments for your circumstances. Below are details of the calculations being performed.
Income Tax
| Standard Allowances | |
|---|---|
| Under 65 | £ 9,440 |
| 65 to 75 | £ 10,500 |
| Over 75 | £ 10,660 |
| Over 65 income limit | £ 26,100 |
| Overall income limit | £ 100,000 |
| Additional Allowances | |
| Blind Allowance | £ 2,160 |
| Married rebate | £ 791.50 |
| Tax Bands | |
| (on taxable income after allowances) | |
| £ 0 - £ 32,010 | 20 % |
| £ 32,010 - £ 150,000 | 40 % |
| Over £ 150,000 | 45 % |
Income tax is normally deducted by your employer using Pay As You Earn (PAYE). The amount you pay depends on how much you earn. Firstly, you are entitled to a certain amount tax-free in the form of a standard allowance. For those under 65 years of age, this is £9,440 - over 65s get an increased allowance of £10,500 and over 75s an allowance of £10,660. However, the old-age allowance (i.e. the increased allowances for those over 65) is reduced by £1 for every £2 of income over the income limit of £26,100 until it reaches the under-65 allowance. Finally, those lucky enough to be earning over the £100,000 income limit have their allowance reduced by £1 for every £2 over that value until the tax-free allowance reaches zero. Your tax-free allowance may be affected if you have a different Tax Code - see below for more information.
Additional allowances are available if you are registered as blind or are over 75 and married. The blind receive a further allowance of £2,160 and those over 75 and married receive a rebate, after other deductions, of £791.50. This married rebate is reduced if your income is sufficient to reduce your age-related allowance down to the normal allowance - any additional income over this level will reduce the married rebate until it reaches £304.
Tax bands are applied to taxable income (i.e. after the allowance has been deducted) so that as you earn more money, you pay a higher rate of tax. On the first £32,010 of taxable income, you pay 20% tax. Between £32,010 and £150,000 you pay 40% tax, and above £150,000 you pay 45% tax.
Tax codes are used by HRMC to tell your employer that you should have a different personal allowance from the standard allowances listed above. This often happens because you are receiving other taxable benefits from your employer, such as private healthcare or a company car. Usually, this has the effect of reducing your allowance and therefore increasing the tax you pay. Most tax codes indicate the new personal allowance with a number which should be multiplied by 10 and then have £5 added to give the new allowance. The tax code 944L would give the standard personal allowance of £9,440.
- L, P, T and Y codes indicate the new personal allowance as described above
- K codes indicate that taxable income should be increased, usually to collect additional tax
- BR code means that you pay the Basic Rate (20%) on all income.
- D0 code means that you pay 40% tax on all income.
- NT code means that you pay no tax
National Insurance
| NI Code A | |
|---|---|
| £ 0 - £ 149 / week | 0 % |
| £ 149 - £ 797 / week | 12 % |
| £ 797 and above | 2 % |
| NI Codes D and F | |
| £ 0 - £ 149 / week | 0 % |
| £ 149 - £ 770 / week | 10.6 % |
| £ 770 - £ 797 / week | 12 % |
| £ 797 and above | 2 % |
| £ 109 - £ 149 rebate | 1.4 % |
National Insurance is separate from income tax but is also calculated depending on how much you earn. Most employees who are not paying into a pension will have NI Code A applied, with the band A rates and thresholds applied. If your total income, before tax, is less than £149 per week you will pay no National Insurance contributions. Between £149 and £797 per week you will pay 12%. Above £797 per week you will pay 2%.
Employer pension schemes often affect the rate at which you pay National Insurance. If the pension scheme is classed as "contracted out", you are likely to have NI Code D or F applied, which means that you will have band D or F rates and thresholds applied. In these bands, your NI contributions will be similar to those in band A, but between £149 and £770 you will pay only 10.6%. You will also get a rebate of 1.4% on earnings between £109 and £149.
It is possible that you do not make National Insurance contributions - for example, if you are over state pension age. In this case, no deductions are made.
Student Loans
| Plan 1 | |
|---|---|
| £ 0 - £ 16,365 | 0 % |
| £ 16,365 and above | 9 % |
| Plan 2 | |
| £ 0 - £ 21,000 | 0 % |
| £ 21,000 and above | 9 % |
There are now two ways of repaying your Student Loan, called "Plan 1" and "Plan 2". Plan 1 is the same as the previous single way of repaying, and applies if you started your course before 1st September 2012. Plan 2 has a higher repayment threshold and applies if you started your course after 1st September 2012.
Plan 1 Student Loan repayments are made at the rate of 9% of all income over the income limit of £16,365. Plan 2 Student Loan repayments are made at the rate of 9% of all income over the income limit of £21,000. These deductions will continue to be made until HMRC receive instruction from the Student Loans Company that you have paid off the full amount of your loan. In some cases it is possible that you might continue to have deductions made even after you have paid of your loan - the Student Loans Company will normally write to you if this is likely to happen.
Student Loan repayments can be reduced if you receive childcare vouchers (see below). The gross salary used to calculate the repayments is reduced by either the value of the vouchers received or the tax-free limit of those vouchers.
Pension Contributions
Pension contributions are calculated as the percentage you entered of your base salary (i.e., not including overtime). This is deducted from your take-home pay, but as you do not pay tax on pension contributions it is also deducted from your taxable income, reducing the tax that you pay. "Contracted out" pension schemes also affect the amount of National Insurance you pay - please see above for more details.
Childcare Vouchers
Employees with children can sometimes opt to receive some of their salary in the form of Childcare Vouchers. You can receive as much of your salary as you wish through vouchers, but there is a limit to the amount which can be received tax-free. For basic rate tax payers, or those who joined voucher schemes before 6th April 2011, this limit is £2,916 per year. If you pay 40% tax and joined the scheme after 6th April 2011 this limit is £1,488 per year, and for those paying 45% tax it is £1,320.
If you are paying back your Student Loan at the same time as receiving childcare vouchers, the gross income used to calculate repayments will be reduced by the value of the vouchers received (or the tax-free limit, whichever is lower).