The Salary Calculator

April 2014 tax rates applied

by Admin

The Salary Calculator has been updated with the latest tax information which takes effect from 6th April 2014.

There is an increase in the default tax free personal allowance from £9,440 to £10,000, which will reduce the amount of tax due for most taxpayers. Slight increases in the National Insurance thresholds will also help improve the takehome pay for many people.

The most significant change is probably the increase in the repayment threshold for plan 1 student loans from £16,365 per year to £16,910, which will save those repaying their loan nearly £50 over the year. Unfortunately of course, this will just mean it will take longer to repay the loan in the long run but hopefully the extra cash in your pocket will be useful now!

Another significant change this year, which is unlikely to affect any but those who are well paid and nearing retirement, is a reduction in the maximum amount you can put into a pension while still claiming full tax relief – for 2013/14 this limit was £50,000 but from 2014/15 it will be £40,000. If this is likely to affect you, you still have time to make the most of the 2013/14 pension allowance before the end of the tax year!

To see how you will be affected by the new tax rates, go to The Salary Calculator and choose the 2014/15 tax year from the drop-down box. Alternatively, you can view a side-by-side comparison of 2013 and 2014 tax rates.

Tags: 2014, April 2014, HMRC, income tax, national insurance, Pay As You Earn, personal allowance, tax rates, The Salary Calculator

Bonus pay periods

by Admin

Prompted by a comment from Rob on the original blog post, back from when support for bonus payments was added to The Salary Calculator (original post here), The Salary Calculator has been updated so that you can choose your normal pay period when you enter a bonus. Previously, the calculator assumed that you were paid on a monthly basis, and displayed a normal monthly payslip alongside a payslip including the bonus. Now, you can choose whether you are paid monthly, 4-weekly, 2-weekly or weekly and see a side-by-side comparison of a normal payslip with one including your bonus.

It’s important to note that your employer may not perform their bonus calculations in the same way – sometimes (particularly near the start of the tax year) you may have more tax and NI deducted than predicted by the calculator. Normally these over-deductions are corrected in subsequent payslips.

Head this way for the Salary Calculator with bonus payments!

April 2013 tax rates applied to The Salary Calculator

by Admin

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.

If you want to see how the April 2013 income tax rates will affect you, you can get started with The Salary Calculator or try the 2012 / 2013 Income Tax Comparison.

Tags: 45% tax, 50% tax, April 2013, income tax, national insurance, Pay As You Earn, personal allowance, tax rates, The Salary Calculator

New – “Plan 2” Student Loans

by Admin

The Salary Calculator has been updated to support the latest changes to student loan repayments which will take effect for some tax payers next April. For students who start their courses this autumn, the way that deductions will be calculated when they enter the workplace will be different from the deductions applied to students of previous years.

Students whose courses started before 1st September 2012 (including those of you who have completed your course and have even started repaying) will see no change, and will repay the loan with deductions of 9% of your salary which is over a threshold of £15,795 per year. This is as before, but it is now called “Plan 1”. If your course started after 1st September 2012 and you are resident in England or Wales, you will repay under “Plan 2”. Plan 2 repayments are also made at a rate of 9%, but only on salary over a threshold of £21,000 per year. This means that deductions will be lower, and repayment of the loan will take longer. Of course, most students who started their course this autumn will not be expecting to enter employment for a few years, and deductions are only made from the April after you finish your course. However, if your course is short or this will apply to you when you graduate and you would like to see how it will affect your take home pay, The Salary Calculator will show you if you tick the “Plan 2” box. Check out The Salary Calculator to see what your Student Loan deductions will be.

It is in fact possible to have a loan under Plan 1 and a loan under Plan 2 – for example, if you have studied on more than one course. In this case, the deduction from your salary is still just at 9% (over the Plan 1 threshold of £15,795), but the repayment is split between your two loans. Deductions due to salary between £15,795 and £21,000 go towards repaying the Plan 1 loan. Any deductions from salary over £21,000 go towards repaying your Plan 2 loan.

Plan 2 loans also have a different interest rates charged from Plan 1 loans, which at the moment are higher than Plan 1 interest rates. This, coupled with the lower monthly repayments made under Plan 2, means that students with Plan 2 loans will spend more time (and more money!) repaying their loans. Our sister site Loan Tutor has a student loan repayment tool which will allow you to estimate how long it will take you to repay your student loan given your salary, outstanding loan amount and repayment method (i.e. whether your course started after 1st September 2012 or not).

For more information about student loan repayment, see the Student Loan Repayment website.

Tags: Pay As You Earn, student loans, The Salary Calculator

Student Loan repayment threshold

by Admin

Those of you who are repaying your Student Loan through PAYE might have noticed that this month your student loan deduction is a little lower than usual (£5-£6 lower). This is because the annual threshold for student loan repayments increased in April from £15,000 to £15,795.

Income-contingent Student Loans are repaid from the April after you complete your course, at a rate of 9% on any gross income above this threshold. This is similar to the way income tax is calculated – i.e. a percentage of any income above a certain “free” allowance. However, while the tax-free allowance usually increases by a small amount each year, the student loan repayment threshold has been steady at £15,000 since April 2005 – before that, it was £10,000. If you’ve been paying off your student loan for a few years now, you may be surprised to see this change. More information is available from the Student Loan Repayment site. The Salary Calculator is up-to-date with this change to the repayment threshold.

If you are repaying your student loan and you think you might be close to paying it off, this earlier blog post about Student Loan over-repayment may be of interest to you.

Tags: April 2012, debt, Loans, Pay As You Earn, repayment, student loan company, student loans, The Salary Calculator