How this PAYE calculator works
How your age affects how much tax you pay
The amount of tax you pay each year is dependent on your age. Different age groups are given different tax free allowances that you are not required to pay taxes on. Call it one of the perks of getting older if you like! Here are the different tax free allowances for each age group:
- Under 65. If you are under 65 then your default tax free allowance every year is £7,475 allowance.
- 65-74. For people between the ages of 65 and 74, your tax allowance is higher at £9,940 per year
- Over 75. If you are over 75 years of age then your tax free allowance is a whopping £10,090 every year!
How much your student loan repayments will be
If you have a student loan, you can tick the student loan option to allow the calculator to work out how much you'll pay. For the 2011/12 tax year, the salary threshold for student loan repayments is £15,000 a year. If you earn more than this, then you repay 9% of any additional earnings. So if you earn £20,000 a year you will repay 9% of the £5,000 above the threshold, meaning that you would repay a total of £450.
Your National Insurance contributions
National insurance is calculated by working out your weekly salary. If you earn less than £139 a week, you do not pay NI. For weekly earnings between £139 and £817 you will pay 12%. If you earn more than £817 a week then in addition to the 12% you will also pay 2% of any earnings over £817. If you do not pay NI for any other reason, you can check the box to ignore it during the calculation.
Your pension savings
If you choose a percentage for your pension savings, the calculator will work out that percentage of your gross earnings to show you how much you can expect to save.
Tax rates explained
The three tax bands
There are three tax bands that your income can fall in to:
- 20% tax. The first tax band is 20% of your taxable earnings and this is calculated on any earnings you make between £0 and £35,000.
- 40% tax. The second tax band is 40% and this is calculated on earnings between £35,001 and £150,000, in addition to any tax paid between £0 and £35,000 at 20%.
- 50% tax. The final tax band is 50% of any earnings over £150,000 and is in addition to a 40% deduction for earnings between £35,001 and £150,000 and 20% of £0 to £35,000.
Tax free allowances for blind people
If you are registered blind, then you get extra tax free allowances in addition to the age specific tax free allowances. For the 2011/12 tax year, if you check the blind box, the PAYE calculator will add £1,980 to your personal allowance.
Other tax free allowances
If you have any other tax free deductions you want the calculator to take account of, then you can enter an amount into the box provided. This will be added to your Personal Allowance figure and should be entered using the correct gross income (either a yearly, monthly, weekly or daily figure). This can include things like working tax credits or tax free bonds.
Income limits for Personal Allowance
The tax free income allowances you get (£7,475 for under 65's, £9,940 for 65-74 and £10,090 for 75+) are also subject to income limits. If your income exceeds these limits, then your tax free allowance is reduced by £1 for every £2 over the limit your earnings are. For 2011/12 the income limits for Personal Allowance are:
- Under 65 income limit. The income limit for anyone under the age of 65 is £100,000 a year. If your salary was £101,000 per year then you would be deducted £500 from your personal allowance, dropping it from £7,475 to £6,975.
- Age-related income limit. For people aged 65+, the income limit is £24,000 per year. Again, for every £2 over this limit you will be deducted £1 from your tax free allowances.
What does PAYE stand for?
If you are an employee then in most cases your employer will deduct income tax from your salary throughout the year. Any pension providers will do the same thing and both will pay this tax to HM Revenue & Customs (HMRC) using the tax code provided to them. This system is known as PAYE or Pay As You Earn. It is a very simple and easy way to pay your taxes. If you are self-employed, or have income from sources other than an employer, this calculator can be used as a guide, however you should seek professional advice from an accountant.
Occasionally, if your circumstances change, HMRC will issue you with a new tax code by sending out a PAYE Coding Notice. This will tell you how they have worked out your tax-free allowance. Always keep copies of this notices in case you have questions later on, or need to double check the amount of tax you're paying.
What counts as taxable income?
This PAYE calculator is designed to work out what your taxable income is and use that to find out how much tax you need to pay. There are a number of income sources which are classed as taxable income. These include:
- -Earnings from an employer
- -Earnings from self-employment
- -Pension income (including state, company and person)
- -Interest on (most) savings
- -Rental income
- -Income paid from a trust
Help to make this site better
This calculator is a work in progress and can only improve with your help. If you have any questions, bug fixes, feature suggestions or ideas on how to improve this PAYE calculator then please contact us at: firstname.lastname@example.org.
We are currently working on previous tax years and have plans to include childcare vouchers very shortly.this is a test page for test purpose