The Salary Calculator
I read an interesting article this morning on the BBC News website about the phenomenon of people who are unemployed deciding to become self-employed rather than keep looking for “traditional” employment. Apparently, a significant number of people have found that it is difficult to find a job, but that they have been able to start and run promising businesses themselves – something they have found much more fulfilling than taking Jobseeker’s Allowance.
Our sister site Employed and Self Employed has a tax calculator you can use to see how much tax and National Insurance would be deducted from self employment profits, if you are thinking of starting your own business. There is also a more complex calculator if you already have a job but are thinking of becoming self-employed in your spare time – you can work out how much of your profits you would be able to keep hold of.
If you are unemployed and thinking of starting your own business, you may be eligible for some funds from the government to help you get started. More information is available here about the New Enterprise Allowance.
None of the content on this website, including blog posts, comments, or responses to user comments, is offered as financial advice. Figures used are for illustrative purposes only.
A new update to The Salary Calculator allows you to enter deductions which were previously not available. Among the usual options is one for Salary Sacrifice, if you have contractually agreed to reduce your salary by a certain amount in exchange for receiving some other benefit. There are also new options for pre-tax deductions such as Gift Aid and Give As You Earn and after-tax deductions which are just taken out of your payslip each month.
Salary Sacrifice is often used for pension contributions, but The Salary Calculator already has an option for Salary Sacrifice pensions under the “Pension” tab where you can enter a percentage of your salary to be deducted. If you prefer to enter the monthly (or annual) £ amount that you are sacrificing, you can leave the pension field blank and enter the £ amount in the “Salary Sacrifice” tab. Alternatively, you might be making a salary sacrifice for benefits other than a pension (or in addition to a pension) – in which case just enter the amount you’ve sacrificed into the new field.
The “Other Deductions” tab has two new fields on it. One is for pre-tax deductions, like Gift Aid or other charitable contributions like Give As You Earn. The second is for after-tax deductions – i.e. an amount deducted from your take-home pay each month with no impact on your tax or National Insurance.
Head over the The Salary Calculator to check out these new options. I hope you find these new options useful – if you have any feedback or thoughts (or suggestions for other things to be added), please let me know!
In yesterday’s budget, the Chancellor George Osborne outlined his plans for the next couple of years. In terms of take home pay from April onwards, there were no real surprises – the personal allowance has been increased and the top “Additional rate” tax has been reduced from 50% to 45%. In an earlier blog post I have described how these changes have been applied to The Salary Calculator.
Those who are repaying their student loan could be saving as much as £50 next year, as the threshold for repayment has increased from £15,795 to £16,365 – so the deductions from their salary will be less from April. However, the flip side of this is that because less of the loan is being repaid, it will take longer for the loan to be paid off in full and therefore will cost more in the long term.
What I found most interesting about the Chancellor’s announcements yesterday was the extension of an existing scheme for people buying their first house (FirstBuy) to allow more people to take part. The new scheme is called Help to Buy, and will help people to buy a new-build home with a 5% deposit, even if they can’t get the rest of the 95% from a mortgage lender. The government will provide a loan (interest-free for 5 years) for up to 20% of the value of the house, leaving buyers to find only 75% from a mortgage lender. In return, the government will get a share of the equity in the house – so if the house price increases, the amount repayable when the house is sold will increase at the same rate. This scheme is available to first-time buyers and to people who are already on the housing ladder – it does not have to be your first house purchase – and the value of the house can be up to £600,000.
There is also a scheme to help people buy houses which are not new-built, where instead of providing some of the money, the government will guarantee some of the mortgage so that if the buyers default, the lender gets some of the money from the government. This is aimed at encouraging lenders to allow people with small (5%) deposits to borrow.
If it takes off, this scheme has the potential to help people who are currently struggling to buy a home because they don’t have a large enough deposit. It may also help to stimulate the house construction industry, and bolster a flagging property market. The treasury has provided an infographic with some details.
The Salary Calculator has been updated with the latest income tax and National Insurance rates from HMRC which will take effect from 6th April 2013. Although for the moment the current 2012/13 tax year will be applied to calculations by default, you can choose the 2013/14 tax year from the drop-down box to see what your pay slip will look like later this year. You can also see a summary of the 2013/14 values under the normal results, and there is a special Comparison page where you can see 2012 and 2013 side-by-side.
The biggest changes for most people will probably be:
- Tax-free personal allowance increased from £8,105 to £9,440
- Student Loan repayment threshold increased from £15,795 to £16,365
- Additional rate tax for those earning over £150,000 reduced from 50% to 45%
- Over-65 and Over-75 personal allowances not increased
The last of these points was called the “Granny Tax” by detractors when it was first announced, although it is not actually an introduction of a new tax. Previously, those over 65 and over 75 had larger tax-free personal allowances which, like the Under-65 allowance, was increased each year. From April 2013, these allowances will no longer be increased each year and will remain at their current values of £10,500 and £10,660 respectively – until the Under-65 allowance catches up with them. Also, these allowances will no longer be applied to people reaching the qualifying age – only those who were born before 6th April 1948 (or 6th April 1938 for the upper allowance) will receive these allowances. Those reaching these threshold ages after 6th April 2013 will not receive the additional allowance.
Those who are fortunate enough to be earning more than £150,000 will see their tax rate on income over that limit reduced from 50% (where it has been since this tax was introduced in April 2010) to 45%. You might think that, with personal allowances going up and tax rates coming down, everyone will be better off from the start of the new tax year. However, there is a set of people who will find that they pay more tax in the 2013/14 tax year than they did in the 2012/13 tax year, due to a rule which applies to those earning over £100,000.
If you earn more than £100,000 in the year, the tax-free personal allowance is gradually reduced at a rate of £1 for each £2 you earn over the £100,000 limit. Those earning £118,880 or more in 2013/14 will therefore have no tax-free allowance. Because the threshold between 20% and 40% tax has been reduced, those who earn between about £117,000 and £157,000 will find that they actually pay more tax than they did the year before – when those earning less and those earning more will each pay less than they did the year before.
For some time now, people have been asking me to add different pay periods to the results table on The Salary Calculator – not everyone is paid weekly or monthly, so the information displayed was not as helpful as it could be. Well, today, The Salary Calculator has been updated so that you can choose the pay periods which are displayed in the results table. New options available are two-weekly or four-weekly pay.
The old standards of Yearly, Monthly, Weekly and Daily are still available and will be displayed by default. However, if you get paid on a two-weekly basis you can now tick the “2-weekly” checkbox at the bottom of the options to have that displayed in the results table. Alternatively, if you get paid every four weeks (as opposed to monthly), you can tick that option instead.
This is long overdue, I’m sorry to everyone who waited so long to have it available – thank you for your patience! I hope you find this useful – please let me know in the comments if you have any problems with it.
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