About the Salary Calculator
Some information about the April 2018 budget figures used to generate the answers displayed in The Salary Calculator:
|UK Income Tax|
|Tax above personal allowance|
|£0 - £34,500||20%|
|£34,501 - £150,000||40%|
|Scottish tax rates|
|£0 - £2,000||19%|
|£2,001 - £12,150||20%|
|£12,151 - £31,580||21%|
|£31,581 - £150,000||41%|
The Salary Calculator uses Income tax information from April 2018 to calculate the deductions made on a salary. Taxable income is salary over and above the tax allowance for your circumstances.
From April 2016, tax payers of all ages have the same default tax-free personal allowance of £11,850.
From April 2010, those earning over £100,000 have their personal allowance reduced - by £1 for every £2 they earn over £100,000 until their allowance reaches zero, regardless of age. In the case of this reduction of personal allowance, the reduction is calculated using your adjusted net income, which is your gross income reduced by deductions such as pension contributions or charitable donations.
Your personal allowance may be different from the default, as described in the "Tax Codes" section below.
Blind people get an extra £2,390 on their tax allowance. Married people over the age of 83 receive a tax rebate, after other deductions have been made, of £869.50 - although this rebate can be reduced if your income is sufficient, to a minimum of £336.
Any taxable income (i.e. that income above the personal allowance) up to £34,500 is taxed at 20%, from £34,501 to £150,000 is taxed at 40% and taxable income over £150,000 is taxed at the rate of 45%.
From April 2016 the Scottish parliament have been able to set different tax bands from the rest of the UK. If you are resident in Scotland, you will pay 19% on the first £2,000 of income over the personal allowance. From £2,000 to £12,150 the tax rate is 20%. From £12,150 to £31,580 the tax rate is 21%. From £31,580 to £150,000 the tax rate is 41%. Anything earned over £150,000 is taxed at the maximum 46%.
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 is the personal allowance divided by ten. The standard code 1185L indicates a personal allowance of £11,850.
- L, P, Y, M, N 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
- A D1 code indicates you pay 45% tax on all income
- An NT code indicates you pay no tax
From April 2016, tax codes can start with the letter S, which indicates that you pay the Scottish Rate of income tax. These rates are described in the "Income Tax" section above.
|NI code A|
|£162 - £891/week||12%|
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 £162 per week, you will make no National Insurance contributions. Gross earnings between £162 and £891 per week are charged at 12%. Any earnings over £891 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 tick the "No NI" box, National Insurance Contributions are zero.
From April 2016 it is no longer possible to "contract out" of the second state pension - meaning that the reduced NI code D is no longer applied. If you previously paid band D NI you will pay band A NI from April 2016.
Student Loans are repaid with different methods depending on when you started the course for which you took out the loan, and where you lived. If you started the course on or after 1st September 2012 and lived in England or Wales, you will repay under "Plan 2". If you lived in Scotland or Northern Ireland, and/or started the course before 1st September 2012, the loan will be repaid under "Plan 1".
Plan 1 loans are repaid at a rate of 9% on any gross earnings over £18,330 per annum. Plan 2 loans are repaid at a rate of 9% on any gross earnings over £25,000. It is possible to repay under both schemes, if you have studied multiple courses. In this case your total deductions are the same as if you had only a Plan 1 loan, where deductions between the Plan 1 and Plan 2 thresholds go towards repaying your Plan 1 loan, and deductions above the Plan 2 threshold go towards repaying your Plan 2 loan.
More information is available on the Student Loan Repayment website.
If you receive childcare vouchers, the gross amount used to calculate Student Loan liability is reduced by the voucher amount (up to the limits described in the Childcare Voucher section below), reducing your repayment amount.
The Salary Calculator supports 4 different types of pension. Pension contributions are calculated by deducting the percentage rate you enter into the "Pension" field from your standard salary (in most cases, not including overtime). This is an estimate - each employer calculates "pensionable pay" differently and so it may not exactly match The Salary Calculator. How the pension contribution affects your take-home pay depends on the type of pension you are paying into.
There is an annual limit you can pay into a pension scheme and still get these tax benefits. If you pay more into your pension than this limit, you may be liable for additional tax. The limit is currently £40,000.
Auto-enrolment Pension Schemes
Employers are legally obliged to enrol eligible workers into a pension scheme if they are not in one already. These pension schemes deduct a percentage from your earnings but only between a lower and upper threshold (currently £6,032 and £46,350 respectively). Your earnings include your normal salary and also any overtime payments or bonuses earned.
Employer or Occupational Pension Schemes
You don't pay tax on these pension contributions, so your "taxable income" for Income Tax (see above) is reduced by the amount you pay to your pension. National Insurance contributions used to be reduced if you were paying into a contracted-out pension, but from April 2016 this no longer applies.
Salary Sacrifice Pension Schemes
Increasingly popular, these schemes require you to contractually reduce your salary, with the difference being paid into a pension scheme. Since your salary has been reduced, your income tax and National Insurance contributions are also reduced, which the calculator does by deducting your pension contribution before working out income tax and National Insurance. It was unusual for salary sacrifice pension schemes to involve contracting out, which is why the calculator disables this by default.
Personal Pension Schemes
If you pay into a personal pension scheme, your employer will deduct income tax and National Insurance as before. However, HMRC will pay into your pension scheme an amount equal to the basic rate (20%) tax on your contribution, effectively giving you the tax back. If you are a higher or additional rate taxpayer, you can claim the extra tax back from HMRC through your tax return. Contracting out did not apply to personal pension schemes.
Your employer might give you the option to receive some of your salary in the form of Childcare Vouchers, which don't attract tax or National Insurance until the tax-free limit is reached. If you pay basic rate tax and/or you joined the voucher scheme before 6th April 2011, this limit is £2,916 per year. If you joined after 6th April 2011 and you pay 40% tax, the tax-free amount is reduced to £1,488 per year, and if you pay 45% tax it is £1,320.
As well as affecting National Insurance and income tax, childcare vouchers affect Student Loan deductions - the gross amount used to calculate Student Loan deductions is reduced by the value of the vouchers taken (up to the limits described above).
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.
The Mortgage Repayment Calculator makes some assumptions (such that interest is calculated monthly) to calculate 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.