And Tax Code ?

Q: Can anyone provide me with a formula for calculating my monthly income tax deductions based on *monthly* salary and tax code ? ie If my monthly salary is 800 and my tax code is 370 how much should I expect to have deducted for Income Tax ? This should reflect the two different tax bands of 20% and (the new) 24%. It is my intention to put this into a spread-sheet so that I can keep tabs on what is appearing on my home budget.

A: It's relatively straightforward (assuming you haven't got a company car). Take your gross pay and subtract any Pension Payment. This gives your taxable income. Take the number before the letter on your tax code, multiply it by ten add nine and divide by twelve. This gives your monthly 'free' pay. e.g for a single person this value is currently 294.08 [(352 * 10 + 9) / 12]. Subtract this number from your taxable income to give (A). What you have left is what you actually pay tax on. To calculate what you owe at the 20% band take the band limit (currently 3200) and divide by twelve giving 266.67. If (A) is less than this value, your tax is 20% of (A) otherwise subtract 266.67 from (A) giving (B) and put 53.33 (20% of 266.67) in the 'tax to pay' column. Repeat the exercise for the next band. Take the band limit (currently 21,100) and divide by twelve giving 1758.33. If (B) is less than this value, place 25% of (B) in the 'tax to pay' column, otherwise subtract 1758.33 from (B) giving (C) and put 439.58 (25% of 1758.33) in the 'tax to pay' column. (C) is taxed at 40%, so put 40% of (C) in the

'tax to pay' column. For the new tax year simply change the band amounts and tax rates in the above algorithm. Be warned though that your tax code will change as well. 376L normally and 488H for those with the married allowance (if my maths is correct). Essentially you only have to work out the highest band you fall in as the amount attributed to the bands below this will stay the same every month. Note that the figure you come out with will probably not match your payslip exactly. IIRC computerised payroll systems only tax whole pounds and work on an ongoing correction system throughout the year. With PAYE you always pay slightly less tax than you should.