The Salary Calculator

Update to Salary Sacrifice options

by Admin

The Salary Calculator has had an option for “Salary Sacrifice” (where you give up some of your pay in return for some benefit like a cycle to work scheme) for some time. I have just made a small update to this tab because there are in fact two kinds of salary sacrifice – for most schemes, the sacrificed salary only reduces your National Insurance contributions, but a few schemes are tax-exempt and therefore also reduce the amount of income tax you pay. Now, you will see that there are two options on the Salary Sacrifice tab – one for NI only sacrifice and one for tax-exempt sacrifice.

If you take part in one of these schemes, enter the amount you sacrifice and whether that is monthly, weekly or yearly into the option that applies to your scheme. If you are not sure, check the details of your scheme or ask your employer (or compare the results of the calculations with your payslip). If you are a member of multiple schemes you can put the total sacrifice in the relevant option, and if you are a member of some NI only schemes and some tax-exempt ones you can put the relevant values in each option.

n.b. For salary sacrifice pensions and childcare vouchers you should continue to use the dedicated Pension and Childcare Voucher tabs, because the calculations are slightly different.

If you’d like to try it out, head on over to The Salary Calculator!

Tags: income tax, national insurance, Pay As You Earn, salary sacrifce, The Salary Calculator

New option – reduced pay

by Admin

With the coronavirus outbreak affecting businesses around the country, a number of employers have had to make the decision to ask staff not to come in to work. The government announced last week that, to encourage employers not to lay staff off, they will pay up to 80% (to a maximum £2,500 per month) of staff members’ salaries if they keep them on the payroll. As well as trying to ensure that employees still receive some pay, the plan is to keep the workers available so the economy is well placed to start up again once the virus threat is reduced.

I have added an option to the existing Pro-Rata Calculator which allows you to enter a percentage of salary instead of reduced hours. Some employers will continue to pay their employees the full amount during the pandemic, others may only be able to pay what they are receiving from the government. And of course, for other reasons you might be receiving a percentage reduction in salary. If this applies to you, enter your full-time salary and full-time hours, then enter the percentage of your salary that you will be receiving. With tax and pension deductions etc taken into account, you might find that the reduction is not quite as bad as you thought. For example, someone on the UK median full-time salary (which is about £30,000) normally takes home £1,915 per month after tax and 5% auto-enrolment pension contributions. On 80% salary, they would take home £1,595, which is a significant drop but still just over 83% of normal. Other deductions like Student Loan repayment could make the overall reduction to a slightly more manageable 85%.

Also of interest might be the new Sick Pay Calculator, which I launched last week to help people who have had to take a short period of time off on reduced pay.

Tags: coronavirus, covid-19, Economy, furlough, HMRC, income tax, layoff, national insurance, Pay As You Earn, pension, pro-rata, reduced pay, student loans, The Salary Calculator, unemployment

New tool – Sick Pay Calculator

by Admin

With many people having to take time off work due to the current situation with COVID-19, I thought I would try to create a sick pay calculator. If you will be taking time off, and your employer’s policy states that you will receive reduced (or no) pay for your time off, the Sick Pay Calculator will try to estimate the effect on your take-home pay.

You can enter the number of days on a percentage of your normal pay (e.g. 50% for half pay), the number of days on Statutory Sick Pay (n.b. the calculator is not able to tell whether or not you are eligible for SSP, learn more from Citizens Advice), and the number of unpaid days. The calculator will use this information to estimate how your payslip will change.

Please note that different employers calculate things like unpaid leave in different ways, so the calculator’s results may differ from those on your payslip. Also, how much you will get paid for time off depends primarily on what your employer’s relevant policies state – you will need to know what you are entitled to before using the calculator.

Please let me know if you have any trouble using the calculator – I’ve tried to reduce the number of unexpected results, but it is possible with a lot of time off and with many options such as pensions and student loans applied that the answers given might be a bit unusual!

Tags: coronavirus, covid-19, HMRC, income tax, Jobs, national insurance, Pay As You Earn, Pensions, sick pay, student loans, The Salary Calculator, unpaid leave

April 2020 calculations

by Admin

The Salary Calculator has been updated with the tax rates which currently stand to take effect from 6th April 2020. I say “currently”, because there is a Budget taking place on Wednesday 11th March and it is possible that some changes to tax rates or allowances will be announced. If this is the case, the calculator will be updated with the latest values as soon as possible following the Budget.

At the moment, no changes to the tax-free personal allowance or income tax rates have been announced (apart from in Scotland, where some tax thresholds have been increased slightly). However, the threshold for when you start paying National Insurance has increased, meaning that National Insurance contributions will be reduced by up to £104 per year.

Those repaying their undergraduate student loans will also find that the repayment threshold has increased – for Plan 1 it will be £19,390, and Plan 2 £26,575 per year. Although this increase will reduce the payments you make in each payslip, it will of course mean that it takes longer to repay your loan.

If you’d like to see how the changes will affect you, head over to The Salary Calculator and remember to choose 2020/21 from the Tax Year drop-down box.

Tags: April 2020, budget, income tax, national insurance, Pay As You Earn, personal allowance, student loans, tax rates, The Salary Calculator

New! Taxable cash allowances

by Admin

For some time now, The Salary Calculator has allowed you to enter the value of any taxable benefits that you receive (such as private health insurance, or a company car). These are things that your employer pays for and you get the benefit of, and therefore you pay tax on the value of these benefits even though you don’t receive any extra cash. I have had a lot of people contact me asking about a similar option, but this time for when your employer pays you extra cash so that you can pay for something yourself – a common one was a car allowance (as opposed to a company car) or a mobile phone allowance.

This option has finally been added to the calculator, on the Taxable Benefits tab. If you receive such an allowance, enter the value of it into the “cash allowances” option, and choose whether you receive this amount annually, monthly or weekly. Cash allowances are treated differently from benefits in kind in two main ways – firstly, they are extra cash so your take-home pay will increase despite the extra tax, and secondly, National Insurance is deducted as well as income tax.

You can also choose, on the Pension tab, whether your employer includes the value of your cash allowances when working out your pension contributions.

If you receive a cash allowance (or have been offered one) and would like to see what difference it would make, try it out on The Salary Calculator!

Tags: benefits in kind, cash allowances, income tax, national insurance, Pay As You Earn, pension, Pensions, taxable benefits, The Salary Calculator