Tax from my salary

[filthiestfis]

What is the % of work tax?
I want to know how they work out how much money they deduct from my monthly wages. There must be a percentage, right?
What about National Insurance Contributions? How is that worked out?

[Kimbles20]

Not entirely sure about NI but with Tax, if you earn less than �36,000 a year then you are taked about 22%

[squashBall]

go here to check.

http://www.listentotaxman.com/

[redcrx]

your tax code will tell you what amount you dont pay tax on

[bednobs]

if i was roughly working out take home pay i would take about 30% off of gross pay (very rough)

[Buenchico]

In the current tax year, you can earn �5225 without paying any income tax on it. (Since PAYE averages out tax payments over the year, that means that roughly �100 per week of your earnings is free of tax).

You're then allowed a further �2230 per year which is only taxed at 10%. So roughly �43 of your weekly earnings is taxed at this rate.

Unless your annual salary is over �40,035, everything else is taxed at 22%. (Above �40,035p.a. a tax rate of 40% applies).

Here's a rough example for someone earning �300 per week:
First �100, tax rate = 0%. Tax =�0
Next �43, tax rate = 10%. Tax = �4 (to nearest pound)
Remaining �157, tax rate = 22%. Tax = �35 (to nearest pound)
Total tax = �0 + �4 + �35 = �39.

National Insurance contributions basically cut in at above �87 per week, at a rate of 11%. So, an employee earning �300 per week pays nothing on the first �87 and then 11% of the remaining �213. (Roughly �23).

So the total deductions (excluding such things as contributory pension schemes) for an employee earning �300 per week come to about �62. (Roughly 21% of earnings).

For someone earning �500 per week, the figures work out roughly as:
Tax = �0 + �4 + �79. NI = �45.
Total deductions = �128. (About 26% of earnings).

Chris

[kempie]

Chris - a comprehensive answer as ever, but I should point out that although the 2007/8 Lower Earnings Limit for Class 1 NIC is �87pw, an individual will only start to pay (non contracted-out) NIC at 11% for income over the Primary Threshold which is currently set at �100pw.