I havent use the forum for sometime, but i need your help so i m back. Can someone please help me.
scenario
Salary 24000k pa, and this is the first job since April, what code should I use and how is the tax calculated.
I have used 767L the emergency code as there is no P45 and is statement A, however i m not certain that the NIC calculation is correct as is done by Quick Books.
The emergency tax code as donated by Statement A of the P46 should be 747L on a cumulative basis. It should be pretty straightforward if you are using Quickbooks payroll, if you have entered all the information correctly it should work it out for you. Do you think it hasn't calculated the tax and NI correctly and are you asking how to work it out manually?
An employee's tax code does not affect their NI in any way. PAYE and NI are calculated according to completely separate rules. An employee's NI is determined by their NI Table letter (which is A for most employees).
Is there any particular reason why you think your payroll software is getting the NI wrong? That would be most unusual.
Thank you very much for your reply, I have entered all the info correct I m sure ( i hope), and based on 2000 per month gross the Tax / NIC deducted was 167.67 if i remember correct, i thought should be more than that. If i do manual calculation i get completly different figure.
I m not sure guys,
I appreciate your help very much, it really worrys me.
Figure looks about correct (is actually £167.76), but is just NI as there is no tax yet. As the tax code is on cumulative basis there is 5 months worth of freepay to use up, totalling £3116.30, so no tax to pay this month. Obviously will also be employers NI at £194.71.
Vas, Helen is right, I'll just run through the manual calculation with you, then you can see where you went wrong.
The annual primary threshold (PT) (above which employee's NI is calculated) is £7225. For monthly payments to employee each payment is taken in isolation, so monthly PT is £7225/12 = £602 (after rounding). £2000-£602 = £1398 to be taxed at 12%, which is £167.76.
Similar logic applies to employers NI contributions, but at a slightly lower threshold (£7072pa) and a different percentage rate (13.8%).
You can look up the answer in these tables (which show monthly NI contributions at £4 earnings intervals).
-- Edited by Tom McClelland on Wednesday 31st of August 2011 08:57:41 AM
