The Salary Calculator

Irish Salary Calculator launched!

by Admin

In response to a few requests, an Irish version of The Salary Calculator has been launched! This new site allows you to perform take-home pay calculations according to the tax laws in Ireland. As well as Irish Income Tax, there is also support for the Universal Social Charge (USC) and Pay-Related Social Insurance (PRSI), and pensions, tax credits and allowances.

Why not take a look at the Irish Salary Calculator and see how your take-home pay might change? You can also perform calculations for an hourly wage, and work out what salary you need to get the take-home pay you desire. Pro-rata calculations are also catered for. You can read about the calculations performed on this page about The Irish Salary Calculator.

At the moment, there aren’t as many options available as there are on the UK Salary Calculator. If you live in Ireland or pay Irish tax and would like new features added to The Salary Calculator, please let me know!

Tags: euro, income tax, Ireland, Irish, Irish Salary Calculator, PRSI, Salary Calculator Ireland, USC

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

Updates for USA tax changes

by Admin

Over the New Year period I was in the USA, watching with interest as the government there tried to resolve their tax and spending problem that was called the “fiscal cliff”. This cliff was due to the fact that many of their tax laws were due to expire at the end of 2012 and they had not yet agreed how to proceed for 2013. Tax years in the USA are the same as calendar years, starting on 1st January, so it was important that they reached a conclusion over the holiday period.

There is a US version of The Salary Calculator, and so I needed to know how to update it for 2013. Unfortunately, when the answer came, it wasn’t simple and it wasn’t very clear, either. As well as changes to some of the tax rates (including an increase for the top rate from 35% to 39.6%), there was an additional Medicare (health care) tax of 0.9% on those earning over $200,000 ($250,000 for married couples). There was also the re-introduction of old regulations which reduce the amount you can deduct before tax – Personal Exemption Phaseout (PEP) and “Pease” (reduction of pre-tax deductions named after the congressman who created it). PEP is similar to the personal allowance reduction which occurs in UK tax if you earn over £100,000 and applies to those earning more than $250,000 ($300,000 for married couples). Pease reduces pre-tax deductions such as charitable giving for those earning more than these same thresholds. The overall effect is to increase income tax revenue, largely from the upper middle class and the wealthy.

As well as applying these tax changes to The Salary Calculator, I also had to include something called Alternative Minimum Tax, which is used to make sure that taxpayers don’t use so many deductions and loopholes to reduce their tax burden below a certain percentage of their income. This had been in effect for a few years but was rising in prominence and the number of taxpayers it affects, so I was overdue in adding it.

All of this led to a significant amount of work, not least in finding reliable figures for the thresholds and rates which apply to all of these for 2013. Even though I believe I have found the latest ones, the US government is meeting again later in the year to discuss tax plans again, and it is possible that these figures or rules may even be changed again – if this happens I will update the US Salary Calculator with the latest information. To learn more about the tax calculations, see this page about the US Salary Calculator.

Tags: 2013, fiscal cliff, The Salary Calculator, united states, us, usa, USA tax

Changes to Child Benefit

by Admin

As you might have seen in the news, the government has introduced changes to who is eligible to receive Child Benefit, taking effect from 7th January 2013. If you or your partner earn over £50,000, the amount of Child Benefit you are eligible for will be reduced – and if one of you earns over £60,000 you will not be eligible to receive any Child Benefit. Those who are earning between £50,000 and £60,000 will have a choice to make before 7th January, since they can still keep some of the Child Benefit they are used to. You can either:

1. Opt out of Child Benefit, and stop receiving it from 7th January 2012
2. Choose to continue receiving Child Benefit, but pay a “High Income Charge” as an extra tax, effectively reducing their net Child Benefit. To do this, they must register for Self Assessment and complete a tax return each year

If you choose option 2, you will receive the same amount of Child Benefit as you currently do – but you will have to complete a tax return at the end of the tax year, and HMRC will levy an additional tax of some (or all) of the Child Benefit you received. This so-called “High Income Charge” is calculated as a proportion of where your total income comes between the £50,000 and £60,000 thresholds – e.g., if your income is £55,000, you will have to pay back 50% of the Child Benefit you receive. The income used is your “adjusted net income”, which is not simply your salary – you must add to this any additional income like interest paid on savings, and deduct eligible pension contributions. When you complete a tax return through Self Assessment, HMRC will work out your adjusted net income and the proportion of Child Benefit that you must repay. The High Income Charge will never be more than the Child Benefit you or your partner received. More information is available on HMRC’s High Income Child Benefit Charge page.

If you find yourself in the £50,000 – £60,000 income band, you have a limited amount of time to decide whether you are going to give up Child Benefit or register for Self Assessment (if you haven’t already) and pay the High Income Charge. To help you understand better how this will affect you, there is a government tool you can use to help decide what to do, which will guide you through the relevant points to consider.

Tags: April 2012, Child Benefit, High Income Charge, HMRC, January 2012, Self Assessment

Childcare voucher petition

by Admin

Since my blog post about childcare vouchers earlier this week, I’ve heard from the people at Busy Bees Benefits, one of the companies that offer childcare voucher schemes to employers, like those I described in my blog post. They told me about a petition they have launched to increase the value of vouchers that could be received by parents tax-free.

As I described in my previous post, the value of vouchers that can be received tax-free is currently £2,915 per year, or £55 per week. This limit has been the same since 2006, but many parents are finding that the cost of childcare has increased in the years since then so the vouchers do not cover as much of their childcare fees. Busy Bees Benefits are trying to get this limit raised to £75 per week (£3,975 per year), and the first step is to get 100,000 signatures on the petition so the proposal can be debated in Parliament. Increasing the tax-free limit would allow parents to sacrifice more of their salary in exchange for vouchers, therefore saving more tax and National Insurance.

More details are available on the Busy Bees Benefits childcare voucher petition page, where you can learn more and sign the petition if you want to back the change!

Tags: childcare vouchers, income tax, national insurance, Pay As You Earn, The Salary Calculator