Tax Calculator

Tax Calculator is a free online tool to calculate your Income Tax. Our Income Tax Calculator is a simple tool to use. Our tax calculator quickly checks the tax you will need to pay & your net wage. Our income tax calculator works out your take home pay and PAYE that you will owe to HMRC otherwise known as the Taxman. Just enter your salary into our tax calculator.

Gross income
Gross income every
Tax year

Tax codes

What they are:

HMRC have an element of control/discretion in what they tax you if you are a salaried employee. They do this by adjusting your tax code. Your tax code controls what tax free income you are entitled to in the year. If your tax free income level is reduced, you will pay tax on the income that would previously have been tax free - increasing the tax they collect on the same salary. HMRC don't arbitrarily choose when your tax code is adjusted, it will be adjusted if you earn other non taxed income (self employed income or dividends*), or receive non cash benefits e.g. a company car or medical insurance. To calculate your weekly or monthly take home pay, your tax free amount (personal allowance) is allocated over the number of wage slips you receive each year.

How they work:

Tax codes are cumulative in nature (unless they end in M1 or W1 - more below), so if your income fluctuates and in some months you earn less than the personal allowance threshold (e,g, £958/month for monthly pay), then the unused portion of allowance for the month is carried forward and can be used in a later month or pay period when you earn more.

Tax codes can also be set on a monthly/weekly basis (referred to as week one, month one or emergency codes). These codes do not factor in any previous periods in the tax year, so any unused personal allowance is not carried forward.

Examples:

Self employment - so if you have your own business on the side, as well as paying PAYE - tax will be collected on your self employed income by reducing the amount of personal allowance you are eligible for in your monthly wage. E.g. You have a job earning £25,000 and sole trade income of £8,000. A standard tax code of 1150L gives you £11,500 of personal allowance in 2017/18 or £958 a month. HMRC will adjust your tax code so you'll get a reduced tax free amount of £3,500 in the year or £291/month. By making this adjustment, you pay 20% tax on your £8,000 self-employed income via your salary rather than having to pay tax when filing your Tax Return.

Your tax code will always be adjusted based on your previous year's untaxed income, so there will always be a year-end adjustment should the amount of untaxed income change.

Benefit in Kind

These are non cash benefits received through your job such as a company car or medical insurance. To tax these benefits they are allocated a monetary value, then this value reduces your personal allowance, per the example above.

*over the tax free threshold - £5,000 in 2017/18. Tax code letters - taken from - https://www.gov.uk/tax-codes

General Definitions

  • Taxable income - the income figure that you are charged income tax on.
  • Income Tax - is the tax charged on your income, charged at different rates depending on your level of income.
  • National Insurance - effectively another tax on income which is calculated on different thresholds and rates from income, paying national insurance qualifies you for certain benefits, e.g. state pension.


Employee Specific Definitions

  • Gross Income - Your pay before tax and national insurance (deductions) are withheld.
  • Expenses - generally speaking employees are not allowed to claim expenses for costs incurred for work https://www.gov.uk/tax-relief-for-employees
  • Pay As You Earn (PAYE) - the form of taxing employees, where tax is withheld from pay by the employer and paid over to HMRC in the month it is earned.
  • Net Pay - what you take home after income tax and national insurance are withheld.


National Insurance

Example of difference between cumulative and Week 1/Month 1 tax calculation

E.g.1 - Say you are entitled to your full personal allowance (£11,500/year, £958/month or £221/week) you're paid £15/hour and your work hours vary each week.

In the first week of the tax year you work 20 hours, earning £300. In the second week you work 8 hours, earning £120. In the third week you work 25 hours, totalling £375.

A Week 1 tax code

(W1 or X) would see the tax calculated for each pay packet as though it were your first pay of the year.

E.g. First week - Income tax of £15.80 is deducted (income over personal allowance £79 is taxed at 20%). Second week - Income tax of £nil is deducted (there is no income above personal allowance threshold) Third week- Income of tax of £30.80 is deducted (income over personal allowance is £154 and is taxed at 20%)

Total tax deducted under a W1 or code ending in X is £46.60

A cumulative tax code

(e.g. L), looks at the income in previous weeks and deducts tax on the total income for the year to date. E.g.

First week - income tax of £15.80 is deducted (same as for W1 or X, above). Second week - income tax of £nil is deducted (same as for W1 or X, above). Third week - income tax of £10.60 is deducted (here the cumulative calculation factors in the £101 of personal allowance not used in the second week, saving you £20.20)

Total tax deducted under a cumulative calculation is £26.40.

Please note that any tax that is over deducted from your pay will find its way back to, it will just be in the next tax year.

National Insurance - Class 1 (for employees)

National insurance - Class 1 is an additional deduction taken from employees 16 years and over, it is payable until you reach your defined state pension age. It is a 12% tax charged on wages and salaries that exceed the Primary Threshold (PT) level, depending on how often you get paid, up to an Upper Earning Limit (UEL). These ranges are:

  • Weekly payments - £157 up to £866
  • Monthly payments- £680 up to £3,750, or
  • Annually £8,164 up to £45,000.

National insurance is deducted at 2% on income above these upper limits.

Unlike income tax whose collection is controlled by your tax code (altering your 'tax free' threshold and dictating which calculation method is used - cumulative or week one/month one - see example above), national insurance thresholds are universal and always calculated on a Week 1/Month 1 basis. The only exception to this is if you are a company director and national insurance class 1 is payable cumulatively.

Another interesting quirke of National Insurance is that - paying it makes you eligible for the state pension, yet there is a lower earnings level (LEL) whereby you don't pay any National insurance yet still get a qualifying credit for the state pension, the lower earnings levels for each payment frequency are £113/week, £490/month or £5,876 annually.

This isn't so helpful to common employees, but can be very useful for closely held companies (where the shareholders are the directors and employees of the company). Wages can be set to get state pension credits but not have any national insurance payments to make to HMRC.

National insurance was originally introduced for, and amounts collected went toward the state pension. Now, contributions to National Insurance still qualify you to receive the state pension, but revenue raised from National Insurance contributes to a range of state benefits (rather than adding to the state pension pot only)

Self Employed

  • Definitions are slightly different for those who run their own businesses/work for themselves.
  • Gross income is your total sales (before deducting expenses incurred to generate that income).
  • Expenses - Costs incurred to generate income are able to be subtracted or deducted from gross income before tax is calculated.
  • Capital Allowances - Costs of non perishable items that are used in the business, so items that are reused; tools, vehicles (vans & trucks), office equipment, plant and machinery.
  • Net Income - Gross income less expenses and capital allowances.
  • Self Assessment - Is the form of paying tax for the self employed. Unlike PAYE, self assessment tax is collected once a year or split over two 'payment on account' dates.


Tax Calculator

Our tax calculator calculates your personal tax free allowance.

Personal Tax Free Allowance

Table of personal tax free allowance by tax year.

Tax Year Personal Tax Allowance
2017 / 2018 £11,500
2016 / 2017 £11,000
2015 / 2016 £10,600
2014 / 2015 £10,000
2013 / 2014 £9,440
2012 / 2013 £8,105
2011 / 2012 £7,475

Note that for UK income above £100,000, the Personal Allowance reduces by £1 for every £2 of income above the £100,000 limit.



Salary Calculator

Our salary calculator calculates your income tax and national insurance contributions.

Income Tax Bands

Table of income tax bands by tax year.

Tax Year Basic Rate Higher Rate Additional Rate
2017 / 2018 £0 - £33,500 (20%) £33,500 - £150,000 (40%) £150,000+ (45%)
2016 / 2017 £0 - £32,000 (20%) £32,000 - £150,000 (40%) £150,000+ (45%)
2015 / 2016 £0 - £31,785 (20%) £31,785 - £150,000 (40%) £150,000+ (45%)
2014 / 2015 £0 - £31,865 (20%) £31,865 - £150,000 (40%) £150,000+ (45%)
2013 / 2014 £0 - £32,010 (20%) £32,010 - £150,000 (40%) £150,000+ (45%)
2012 / 2013 £0 - £34,370 (20%) £34,370 - £150,000 (40%) £150,000+ (50%)
2011 / 2012 £0 - £35,000 (20%) £35,000 - £150,000 (40%) £150,000+ (50%)


National Insurance Tax Bands

Table of national insurance thresholds tax bands by tax year.

Tax Year Primary Secondary Lower Earnings Upper Earnings
2017-2018 £8,164 £8,164 £5,876 £45,032
2016-2017 £8,060 £8,112 £5,824 £43,004
2015-2016 £8,060 £8,112 £5,824 £42,385
2014-2015 £7,956 £7,956 £5,772 £41,865
2013-2014 £7,755 £7,696 £5,668 £41,450
2012-2013 £7,605 £7,488 £5,564 £42,475
2011-2012 £7,225 £7,072 £5,304 £42,475

Income Tax Calculator uses UK tax brackets and personal allowance thresholds which are verified to HMRC's rates and allowances for Income Tax and National Insurance Contributions.


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