How to use Salary Calculator
Quick Estimation:
For a quick
estimation of your Take Home Salary, simply enter your yearly gross
salary and hit Calculate.
Accurate
Calculation:
If you need more accurate calculation of your
Take Home, enter the Advanced Options(refer below) and calculate.
Advanced Options
Financial Year, Age:
Financial Year and your Income determine your
Personal Allowance and National Insurance. Personal allowance is
deducted from your gross salary before tax is applied on your salary.
Entering Financial Year and Age will provide a better estimate of
your Take Home Salary. The below table depicts Personal Allowance for
the financial year 2021/2022 is 12,570 GBP
Bonus
If you know your Bonus, you can
enter it OR if you don't know your bonus, you can enter expected
amount to get an estimate of you take home and taxes. Note that Bonus
is treated as Salary so both Income Tax and NI applied on Bonus.
Employer Pension Contribution
This is
the amount employer pays into your pension pot. This amount is not
deducted from your salary but paid by your employer as benefit.
Employer's pension contribution is tax and NI free. The calculator
lets you enter this as a percentage of your salary as employers
usually pay this a percentage of your salary.
Employee Pension Contribution
This is
the amount deducted from your gross salary and paid into your pension
pot. Income Tax and NI are not applied on this amount.The calculator
lets you enter this as a percentage of your salary.
Cycle to Work Scheme
This is also a
form of salary sacrifice to save money on Tax and NI. It works like
this, you decide how much you want to spend on the bicycle and
related safety equipment(usually employers offer this upto an amount
of 1000 GBP), employer gives you a voucher for that amount. You take the
voucher to the approved retailer and pick your bike and related
safety equipment like helmet, lights, etc and pay with the voucher.
Note that you don't own the bike, your employer owns it and you lease
it, at the end of the lease period(usually an year) your employer
usually sell it to the employee for a nominal amount. You are
required to use the cycle for more than 50% of your journeys. You can
enter value of cycle to work voucher availed under the Tab 'Salary
Sacrifice'.
Take Home Salary Calculation
The below steps explain how the Salary Calculator calculates your
Take Home Salary, Income Tax and NI.
Step 1. Determine Taxable Income:
Your
Taxable Income is obtained by deducting your personal allowance and
deductions for your gross salary.
Taxable Income = Gross Salary - Personal Allowance - Deductions (
Child Care Vouchers, Salary Sacrifice, Employee Pension Contributions
)
Step 2. Calculate Income Tax:
Income
tax is calculated by applying the tax rates on your taxable income
as below.
20% for the income between 0 - 37,699
40% for the income
between 37,700 - 150,000
45% for the income above
150,000
Step 3. Calculate National Insurance:
National Insurance is calculated by applying the tax rates on your
taxable with out deducting the personal allowance. This is because
personal allowance is only applicable to Income Tax calculation.
However you only pay NI for amount over 9568.52
0% for the income between 0 - 9568.52
12% for the income
between 9568.52 - 50284
2% for the income above
50284
Step 4. Take Home Salary Calculation:
Take home salary is calculating by deducting income tax, NI and
other salary deductions.
Take Home
Salary = Gross Salary - Income Tax - NI - Deductions ( Child Care
Vouchers, Salary Sacrifice, Employee Pension Contribution )