Calculating a payslip in the UK can be quite difficult but not impossible, thanks to the downloadable spreadsheet we’ve created

 

1) Login/register to purchase and download the UK Payroll Spreadsheet: 

UK and Scotland Payroll Spreadsheets

2) Watch the video explainer below:

Explainer:

The following information relates to the tax year 2020/2021 (April 6th 2020 to April 5th 2021)

UK (England, Wales, Northern Ireland) PAYE Tax Bands:

  • Basic Rate (taxed at 20%): Taxed on income between £12,501 and £50,000 (you pay tax on £37,500)

  • Higher Rate (taxed at 40%): Taxed on income between £37,501 and £150,000

  • Additional Rate (taxed at 45%) Taxed on income above £150,000

Scotland PAYE Tax Bands:

  • Starter Rate (taxed at 19%): Taxed on income between £12,501 and £14,585 (you pay tax on £2,084)

  • Basic Rate (taxed at 20%): Taxed on income between £14,586 and £25,158 (you pay tax at this rate for a maximum of £10,573)

  • Intermediate Rate (taxed at 21%): Taxed on gross income between £25,159 and £43,430

  • Higher Rate (taxed at 41%): Taxed on income between £43,431 and £150,000

  • Additional Rate (taxed at 46%): Taxed on income above £150,000

Personal Allowance & Personal Allowance Reducer

Personal allowance for the tax year 2020/2021 is £12,500. The above information assumes the individual is receiving the Personal Allowance for tax-free income of £12,500 in the tax year. The Personal Allowance is reduced by £1 for every £2 earned over £100,000. Your personal tax allowance will be £12,500 if your tax code is 1250L. Your tax code may be different to this if you have tax owing or are on emergency tax.

Employee’s & Employer’s National Insurance Contributions

  • Primary Threshold: Gross earnings up to £9,500 will not be subject to NICs

  • Between Primary Threshold and Upper Earnings Limit: Gross earnings between £9,501 and £50,000 will be taxed at 12%

  • After Upper Earnings Limit: Gross earnings after £50,001 will be taxed at 2%

  • NICs for Employers: Employers pay 13.8% NICs for gross income over £8,788 per year

Pension Contributions (Employee, Employer and Government)

  • Up to Lower Level of Qualifying Earnings: Gross earnings up to £6,240 will not be subject to Pension contributions

  • Between Lower Level and Upper Level of Qualifying Earnings: Gross earnings between £6,241 and £50,000 will be subject to pre-tax pension contributions of 4% for the employee and 3% for the employer. As it’s pre-tax, the government is technically providing a 1% contribution

  • After Upper Lever of Qualifying Earnings: Gross earnings after £50,001 cannot be considered for tax-efficient pension contributions.

  • We recommend using NEST as your pension scheme provider

Payroll Setup

Uh-oh. I’m still unsure how this works, help!

Talk to your accountant – or even better, talk to us!

Let’s wrap this up

So there you have it – hopefully knowing how to calculate a UK payslip is a little more clear and a little less scary to you. Of course, if you are still boggled by it or just want to make sure it is done right, book a free Discovery Call with us today.

Disclaimer: This guide is for informational purposes only and specific accounting and tax advice should always be obtained where appropriate.

Colin Sweetman, ACCA

Colin Sweetman, ACCA

Colin is a chartered certified accountant and founding director of First Accounts and FutureME, as well as a contributor on The Accounting Channel (Breakeven By Breakfast) and "Finance & The Common Good".