Some information about the April 2011 figures used to generate the answers displayed in The Salary Calculator:
Income Tax
| Under 65 Allowance | £7,475 |
| 65 to 75 Allowance | £9,940 |
| Over 75 Allowance | £10,090 |
| 65+ Income Limit | £24,000 |
| Income Limit | £100,000 |
| Blindness Allowance | £1,980 |
| Married Rebate | £729.50 |
| £0 - £35,000 | 20% |
| £35,001 - £150,000 | 40% |
| over £150,000 | 50% |
The Salary Calculator uses Income tax information from April 2011 to calculate the deductions made on a salary. Taxable income is salary over and above the tax allowance for your circumstances.
If you are under 65 years old, the default tax allowance is £7,475. If you are between 65 and 75, the allowance is £9,940. If you are over 75, the allowance is £10,090. However, over-65s earning more than the Income Limit of £24,000 have their personal allowance reduced by £1 for every £2 over the limit, until it reaches the basic under-65 allowance.
From April 2010, those earning over £100,000 also have their personal allowance reduced - by £1 for every £2 they earn over £100,000 until their allowance reaches zero, regardless of age.
Your personal allowance may be different from the default, as described in the "Tax Codes" section below.
Blind people get an extra £1,980 on their tax allowance. Married people over the age of 75 receive a tax rebate, after other deductions have been made, of £729.50.
Any taxable income (i.e. that income above the personal allowance) up to £35,000 is taxed at 20%, from £35,001 to £150,000 is taxed at 40% and taxable income over £150,000 is taxed at the rate of 50%, introduced in April 2010. The 10% "Starting Rate" of income tax was removed in the April 2008 budget.
Tax Codes
The table above right shows the default personal allowance as described in the previous section. However, 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. You can enter this tax code into The Salary Calculator to get a more accurate calculation of your take-home pay.
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 747L indicates a personal allowance of £7,475.
- 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 more tax
- 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
National Insurance
| NI code A | |
|---|---|
| Below £139/week | 0% |
| £139 - £817/week | 12% |
| Above £817/week | 2% |
| NI codes D and F | |
| Below £139/week | 0% |
| £139 - £770/week | 10.4% |
| £770 - £817/week | 12% |
| Above £817/week | 2% |
| £102-£139/week rebate | 1.6% |
National Insurance code A is applied to most employees who are not paying into a pension, or if your pension is not "contracted-out". If your gross income (ie before tax) is less than £139 per week, you will make no National Insurance contributions. Gross earnings between £139 and £817 per week are charged at 12%. Any earnings over £817 per week are charged at 2%.
If you are receiving the State Pension, you do not have to pay National Insurance. For the purposes of The Salary Calculator, we have simplified this so that if you are 65 or over, National Insurance contributions are zero.
If you are paying into a "contracted-out" pension, National Insurance code D or F is normally applied, which reduces your NI contributions. Your employer can tell you if your pension counts as contracted-out, or your NI band may be displayed on your payslip. Between £139 and £770 per week, NI is only 10.4%. Not only that, but you also get a rebate of 1.6% of earnings between £102 and £139 per week. More information about NI bands on the HMRC website.
Student Loan
| Below £15,000 | 0% |
| Above £15,000 | 9% |
The Student Loan is repayed at a rate of 9% on any gross earnings over £15,000 per annum. This took effect from April 2005 - previously the threshold was £10,000. There is no change to this from April 2011.
Pension Contributions
Pension contributions are calculated by deducting the percentage rate you enter into the "Pension" field from your standard salary (not including overtime). You don't pay tax on pension contributions, so your "taxable income" for Income Tax (see above) is reduced by the amount you pay to your pension. National Insurance contributions are also reduced if you are paying into a contracted-out pension. This is an estimate - each employer calculates "pensionable pay" differently and so it may not exactly match The Salary Calculator. More information on The Salary Calculator blog.
Bonuses
Bonuses are typically paid as a one-off extra on top of your usual salary. The calculator works out what extra deductions (tax, National Insurance and Student Loan) will be required that tax year because of this extra payment, and will add these on top of your usual deductions for that month. This can mean that you have very large deductions in a bonus month, but never larger than the bonus itself.
For the purposes of displaying the information The Salary Calculator assumes that your salary is normally paid monthly, and shows you what a bonus month would look like compared to a normal month. Similar calculations will be done by your employer if you are paid weekly.
Most employers would not include bonus payments when calculating pension contributions, so the calculator also does not modify pension deductions in a bonus month.
Mortgage Calculations
The Mortgage Repayment Calculator uses an iterative process to home in on a repayment amount that completes the mortgage after the entered time period has passed. It also does not include any information about building society fees, or variable rates.
For these reasons, The Mortgage Repayment Calculator is intended just to provide a ballpark figure to allow you to get an idea of the costs of different interest rates etc. Care has been taken to try to make these values accurate, but figures from mortgage lendors are likely to differ.