About The Tax Calculator
The Tax Calculator uses the UK Government's tax information from the April 2023 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 | |
|---|---|
| Personal Allowance | £ 12,570 |
| Overall income limit | £ 100,000 |
| Additional Allowances | |
| Blind Allowance | £ 2,870 |
| Married rebate | £ 1,037.50 |
| Tax Bands | |
| (on taxable income after allowances) | |
| £ 0 - £ 37,700 | 20 % |
| £ 37,700 - £ 125,140 | 40 % |
| Over £ 125,140 | 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 personal allowance. From April 2016, this is the same no matter what your age, and is £12,570. 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 88 and married. The blind receive a further allowance of £2,870 and those over 88 and married receive a rebate, after other deductions, of £1,037.50. 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 £401.
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 £37,700 of taxable income, you pay 20% tax. Between £37,700 and £125,140 you pay 40% tax, and above £125,140 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 1257L would give the standard personal allowance of £12,570.
- L, P, T, Y, M and N 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.
- D1 code means that you pay 45% tax on all income.
- NT code means that you pay no tax
From April 2016, Scottish tax codes will start with the letter S. This indicates that you pay the Scottish rate of income tax, although the total amount of tax due is the same as that due for those in other parts of the UK.
National Insurance
| NI Code A | |
|---|---|
| £ 0 - £ 242 / week | 0 % |
| £ 242 - £ 967 / week | 12 % |
| £ 967 and above | 2 % |
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 £242 per week you will pay no National Insurance contributions. Between £242 and £967 per week you will pay 12%. Above £967 per week you will pay 2%.
Employer pension schemes used to affect the rate at which you pay National Insurance. If the pension scheme was classed as "contracted out", you were likely to have NI Code D or F applied, which meant lower NI contributions. From April 2016 this no longer applies.
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 - £ 22,015 | 0 % |
| £ 22,015 and above | 9 % |
| Plan 2 | |
| £ 0 - £ 27,295 | 0 % |
| £ 27,295 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 £22,015. Plan 2 Student Loan repayments are made at the rate of 9% of all income over the income limit of £27,295. 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.
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).