The Salary Calculator

Visualisation of salary deductions

by Admin

Following the update of The Salary Calculator to April 2012 tax rates, I thought it might be interesting to see how the proportion of your salary eaten up by income tax and National Insurance changes as you earn more money. If you earn less than £8,105 you pay no tax and less than £7,605 you pay no National Insurance. But those earning more than £150,000 per year will be losing nearly half their income to the tax man. I created the following chart showing how your take-home pay increases as your salary increases from £0 to £200,000:

Take home is in blue – the red section on top is the tax you pay, and the yellow section on top of that is National Insurance. For those of you paying off your student loan, here is a version with those deductions on top, in green:

So you can see that as your salary goes up, your take-home pay (the blue line) always increases… but the higher your salary is, the slower your take-home pay increases with each pay rise, as more of it is going to the government.

Tags: April 2012, income tax, national insurance, Pay As You Earn, personal allowance, tax rates, The Salary Calculator

April 2012 Update

by Admin

The Salary Calculator has been updated with the latest tax information which takes effect from 6th April 2012.

This year, the standard personal allowance (the amount you are allowed to earn each year tax-free) has been increased from £7,475 to £8,105 which will mean that most of us will pay less tax. However, for higher earners, the threshold of taxable income for the 40% tax rate has been lowered from £35,000 to £34,370 – which will reduce the improvement from the increased personal allowance (although you should still be better off!). The National Insurance thresholds have also increased slightly, which all goes towards helping you bring more money home each month.

For those paying into pension schemes through their employer there is a change which may affect the amount of National Insurance you pay. Firstly, the NI rebate on “contracted-out” salary related schemes has reduced from 1.6% to 1.4% – which will mean you pay a little more National Insurance than in 2011. However, those paying into a money-purchase pension scheme will find that from April 2012 this is no longer considered “contracted-out”, so you will get no rebate at all. You can see what a difference this will make by un-ticking the “Contracted out” option on The Salary Calculator. More information is available in this goverment document explaining the change [PDF].

Head over to The Salary Calculator to see what a difference this will make to your pay packet next month – there’s even a comparison utility which shows a breakdown of the difference between 2011 and 2012.

You can read more about the April 2012 tax and NI rates on The Salary Calculator’s about page, or these useful pages from HMRC:

• HMRC Income Tax info sheet
• HMRC National Insurance info sheet

Tags: April 2012, HMRC, income tax, national insurance, Pay As You Earn, personal allowance, tax rates, The Salary Calculator

Raising the personal allowance

by Admin

The personal allowance is the amount of money you are allowed to earn each year before you start paying income tax. As mentioned in a recent BBC article, Nick Clegg and the Liberal Democrats made an election pledge to raise the personal allowance to £10,000 (at the time of the election, the personal allowance was £6,475). As part of the coalition government the Conservatives and the Lib Dems agreed to make this increase before 2015, and last year the threshold was increased by £1,000 to £7,475 – although, as I reported at the time, the threshold for 40% tax was lowered at the same time so that those earning more would start paying 40% tax sooner.

This April, the standard allowance for the under-65s is set to increase again, this time to £8,105. This is less of an increase than last year (a change only of £630) but it will still make a significant difference to those on lower incomes. Nick Clegg is pushing for the threshold to be raised quicker than that, but the Conservatives are resisting it for now – the main reason for this being that the lost tax would have to be paid for elsewhere. This could mean either increasing other taxes or making further cuts.

The personal allowance is affected by your tax code, which means you may not receive the standard tax-free amount. More information about tax codes in this blog post.

The Salary Calculator will be updated in early Spring with the tax thresholds and rates for April 2012.

Tags: April 2011, April 2012, HMRC, income tax, national insurance, Pay As You Earn, personal allowance, tax rates, The Salary Calculator

April 2011 rates applied

by Admin

The April 2011 tax and National Insurance rates have been applied to The Salary Calculator.

In comparison to last year, when rates for most of us were unchanged, there are a number of differences which will mean that your payslip will be different next month.

The standard personal allowance (the amount you can earn tax-free) is increasing by a thousand pounds to £7,475, but this is mitigated in some way for higher earners by the threshold for 40% tax being lowered to £35,000. Similarly, NI rates increased by one penny in the pound (to 12% and 2%) but the threshold for paying NI increased so lower earners may not be too badly affected.

To see how you’re affected, try out The Salary Calculator with your salary. The details of the figures used by The Salary Calculator are available on the About page.

Useful links:

• HMRC Income Tax info sheet
• HMRC National Insurance info sheet

Tags: April 2011, HMRC, income tax, national insurance, Pay As You Earn, pension, personal allowance, tax rates, The Salary Calculator

Tax codes added to The Salary Calculator

by Admin

After a great many requests from users of the site, I’ve finally added support for tax codes to The Salary Calculator. If you know what your tax code is, you can now use it on the take home pay calculator, hourly wage calculator and the required salary calculator to get a more accurate indication of your take home pay.

Tax codes exist because in some circumstances HMRC may adjust your personal allowance, often because of benefits like a company car or private healthcare. They do this by providing your employer with a tax code which indicates what your personal allowance should be.

The usual effect of such an adjustment would be to lower your personal allowance, meaning that you pay tax on more of your income. If you receive benefits such as private healthcare or a company car through your employer, you pay more tax on your salary so that the value of these benefits is also taxed.

Tax codes usually indicate the personal allowance by including a number which should be multiplied by 10 and have £5 added to it to make the personal allowance – e.g. the standard code 647L indicates a personal allowance of £6,475.

• L, P, Y and T codes indicate the personal allowance to be assigned as described above
• K codes indicate the amount by which the taxable income should be increased, if you owe tax on other earnings which should have been taxed
• A BR code indicates you pay 20% basic rate tax on all income
• A D0 code indicates you pay 40% tax on all income
• An NT code indicates you pay no tax

In most cases your tax code will stay the same if you change jobs, so now you can use The Salary Calculator to get a more accurate indication of what a pay rise or a new job would mean to you each month!

Tags: HMRC, income tax, Pay As You Earn, personal allowance, tax rates