The Salary Calculator

A fresh start in the New Year?

by Admin

2014 has arrived, and for many people the start of a new year is a time to make a clean break with the past, and move on to new things. Often people join a gym, start a diet (after the excesses of the festive period!) – or look for a new job.

The new job could be a promotion at your current place of work, or a new opportunity elsewhere – and The Salary Calculator can help you as you consider your options. If you’re wondering what a new salary might mean for your monthly take-home, check it out on the take-home pay calculator. If you know how much you need each month and would like to know what kind of salary you should be looking for, try using the required salary calculator.

You might be considering supplementing your income not by getting a new job, but by being self-employed in your spare time. In which case, you can try out the tools at our sister site Employed and Self Employed, which will help you to see how your tax and National Insurance contributions will be affected by your additional income.

If you are making a new start in 2014, best of luck!

Tags: 2014, Employed and Self Employed, income tax, Jobs, national insurance, Pay As You Earn, self employed, The Salary Calculator

Becoming self-employed rather than un-employed

by Admin

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.

Tags: careers, Employed and Self Employed, income tax, Jobs, NEA, New Enterprise Allowance, Pay As You Earn, self employed, The Salary Calculator, unemployment

National Insurance refunds

by Admin

I mentioned last month that The Salary Calculator has a sister site called Employed and Self Employed, which helps with tax and National Insurance calculations if you are both employed and self-employed at the same time (or in the same tax year).

The calculations can get quite complicated and how much you earn in employment affects how much tax and National Insurance you should pay on your self employment. In researching for this site, I discovered that it can be quite easy to pay too much National Insurance on your self employment income if you don’t know about the details of the regulations and if you assume that because you fill in your tax return with both incomes, it will be calculated correctly. This occurs because the National Insurance you pay on employment income (Class 1) is different from the National Insurance you pay on self-employment income (Class 4).

In both Classes of National Insurance, you pay nothing below a certain threshold, a higher “main” rate between that threshold and an upper threshold, and a lower “additional” rate above that threshold. If you are employed and self employed at the same time, you can end up paying a lot of the “main” rate on both of your incomes, whereas if you earned the same amount just from either employment or self employment, some of your income would be charged only the lower “additional” rate of National Insurance. Fortunately, HMRC know this and they will, if requested, take into account any National Insurance you paid through your employment when working out how much you owe them for self-employment. Unfortunately, they won’t do this by default – you need to ask for it.

This is done by applying for exemption of Class 4 National Insurance contributions. This doesn’t mean you pay no Class 4 (unfortunately!), it just means that they will take into account how much Class 1 you have paid when working out how much Class 4 to charge you. If you don’t apply for exemption, they will charge you the standard amount, which might be more than you owe. Luckily, you can apply for a refund if you have overpaid in previous tax years (although not normally until 1st February the year after you overpaid). As a rule of thumb, if each of your employed and self-employed incomes were more than the lower NI threshold (£7,605 for the 2012/13 tax year) and the total of the two incomes was close to or  more than the upper NI threshold (£42,475 for the 2012/13 tax year), you might be due a refund.

To make this easier, there is a new calculator on Employed and Self Employed which will help you work out if you might be due a National Insurance refund. Choose the tax year you’d like to check (as far back as 2005 / 6 – the thresholds were lower in previous years), enter your employment income and self-employment profit for that year, and the amount of Class 4 National Insurance you paid that year. The calculator will compare that with what it expects you to have owed for that year, and will let you know if a refund might be due. There are details on that page for how to contact HMRC and how to claim the refund. The calculator will do its best with the data you provide but it might not agree exactly with HMRC’s calculations – it can be used as an indicator and HMRC will be able to confirm whether or not a refund is due.

Good luck!

Tags: class 1, class 4, Employed and Self Employed, national insurance, self employed

Employed and Self Employed

by Admin

The Salary Calculator attempts to show you your take home pay after tax, National Insurance, pension deductions and Student Loan repayments – based on the assumption that you are an employee, and your employer will be making these deductions from your payslip by Pay As You Earn (PAYE). However, if you are self employed, tax and National Insurance is calculated differently, and you have to tell HMRC about your income, and then pay them what you owe directly.

If you are both employed and self employed at the same time, or change from employment to self employment during the tax year, your tax liability can be quite complicated. Your employment income will have been taxed by your employer, but the amount of self employment tax and National Insurance you pay will be affected by how much you have already paid through normal employment.

A new sister site for The Salary Calculator has been launched to try to help in this situation. Simply called Employed and Self Employed, there is plenty of information available and links to details from HMRC. There is also a complex tax calculator which will try to estimate your tax liability based on the information you provide.

Tax and National Insurance details which take effect from 6th April 2012 are applied, although previous tax years from 2009 onwards are also available for calculations (including the current 2011 tax year). If you are interested in the figures involved, you can check out the details page which contains detailed information from HMRC.

Tags: Employed and Self Employed, income tax, national insurance, Pay As You Earn, self employed, tax rates, tax return