Understanding the intricacies of the UK tax system can be a daunting task for employers, especially when it comes to ensuring that both employee and employer contributions are accurate. That’s why we’ve introduced our free payroll calculator for the 2023/24 tax year, designed to simplify the process for UK employers.
| 22 November 2023 update: |
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| Chancellor Jeremy Hunt announced in the Autumn budget that employee NICs would be reduced – the new standard rate will drop to 10% from the previous 12%. |
Annual salary
The first step in our calculator is straightforward: input the annual salary of your employee. This will be the total amount payable to them before any deductions are made.
Personal allowance and taxable income
The Personal Allowance for the 2023-24 tax year stands at £12,570. This means that income below this threshold is not subject to income tax. It’s essential to be aware of this allowance as it significantly affects the amount of tax payable. Any income earned over this allowance is considered as taxable income.
A critical point to note: For those earning over £100,000, the personal allowance reduces. It decreases by £1 for every £2 earned above £100,000. So, if an employee’s salary is considerably higher, their personal allowance might decrease, increasing their taxable income.
Estimated income tax due
Once the taxable income is determined, the calculator will provide an estimate of the total income tax due for the year. This helps businesses forecast expenses and aids employees in understanding their net income after tax.
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National Insurance Contributions (NICs)
In addition to income tax, employers must also account for National Insurance Contributions. NICs are a significant part of the UK tax system, funding various state benefits.
Our calculator breaks down NICs into two categories:
- Class 1 Primary (employee) NICs: This is the amount to be deducted from the employee’s pay. It’s vital to get this right to ensure compliance and avoid any potential disputes with employees.
- Class 1 Secondary (employer) NICs: This is the contribution the employer makes to HMRC. It’s separate from the employee’s contribution and is a cost borne by the employer.
Conclusion
Our payroll calculator for the 2023/24 tax year is designed to make the lives of UK employers easier. It provides a clear and concise breakdown of all necessary deductions, ensuring compliance with HMRC regulations.
By understanding and utilising this calculator, businesses can ensure that they remain compliant, transparent, and fair in their dealings with both employees and the taxman.
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We encourage all UK employers to make use of this free tool and stay informed about the latest tax changes and regulations.
To compare prices and options for UK payroll, see our payroll cost comparison tool.
Payroll calculator FAQ
The personal allowance is the amount of income an individual can earn in a year without having to pay any income tax on it. For the 2023-24 tax year, this is set at £12,570.
For individuals earning over £100,000, the personal allowance reduces by £1 for every £2 that the income is above £100,000.
Yes, besides Class 1 NICs, there are other classes such as Class 2 and Class 4, mainly for the self-employed. Our calculator focuses on Class 1 NICs relevant for employers and employees.
This payroll calculator is designed primarily for employers to calculate deductions for their employees. If you’re self-employed, you might have different tax considerations, and it would be best to consult a dedicated tool or a financial advisor.
Our calculator is updated annually to reflect the changes in tax rates, allowances, and thresholds announced by HMRC for the upcoming tax year.
This particular calculator is designed for the 2023/24 tax year. If you need to calculate payroll for previous years, you might need to refer to specific calculators or resources for those respective years.
While we strive to ensure our calculator is as accurate as possible, it’s always recommended to consult with a financial advisor or accountant, especially for complex tax situations.
No, our calculator is designed for privacy. All data you input is processed on the spot and is not stored or recorded.
This version of the calculator focuses primarily on tax and National Insurance contributions. For a more comprehensive breakdown, including student loans or pension contributions, you might want to consult a more detailed payroll software or a financial advisor.