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Posted Wed, 10 May 2023 10:17:43 GMT by JL
Hi there, I am trying to calculate the net pay to be paid to the employee after deducting PAYE tax, NI and pension (5%). It seems to me that there are two methods of calculating the net pay. Could you please confirm whether one is correct? If none is correct, could you please point me to the correct method? Below are the two methods that I heard from people around: Method A: Gross salary income = S Taxable income = S * 100% PAYE = S * 100% * 35% (assume the effective tax rate applicable on the taxable income S * 100% is 35%) Pension = S * 5% * 80% (20% tax relief at source; assume 5% pension contribution) NI = S * 4% (assume the effective NI rate on the taxable income is 4%) Net pay = S - S * 100% * 35% - S * 5% * 80% - S * 4% = S * 57% Method B: Gross salary income = S Pension = S * 5% (assume 5% pension contribution) Taxable income = S * (100% - 5%) = S * 95% PAYE = S * 95% * 32% (assume the effective tax rate applicable on the (lower) taxable income S * 95% is 32%) NI = S * 4% (assume the effective NI rate on the taxable income is 5%) Net pay = S - S * 5% - S * 95% * 32% - S * 4% = S * 60.6% Much appreciate your quick feedback and confirmation. Thank you. Best regards, JL
Posted Thu, 25 May 2023 07:07:19 GMT by HMRC Admin 25
Hi JL,

When calculating Net pay, use Gross Pay minus the tax band, and total deductions. This will equal the Net Pay. 
You can also use the HMRC calculator, this makes it easier if calculating anything manually. 

Check your payroll calculations manually

Thank you. 
Posted Thu, 25 May 2023 10:55:11 GMT by JL
Thank you for the response. You mentioned "total deductions" in the formula. If I narrow down my question on the calculation of deduction due to (company's) pension, could you please confirm if Method A or Method B (or else) is correct? Thank you. JL
Posted Thu, 25 May 2023 12:34:22 GMT by Ruth Massey
Really sorry about this I just want to ask a question on the forum but there is no thread for this how do I post Thanks
Posted Wed, 31 May 2023 09:00:33 GMT by martin snydor
Net pay refers to the amount of money an employee takes home after deductions for PAYE (Pay As You Earn) taxes, National Insurance (NI) contributions, and pension contributions have been made. Here's how you can calculate your net pay: Determine your gross pay: Start with your gross pay, which is your total earnings before any deductions. This includes your salary, any bonuses, commissions, or other forms of taxable income. Calculate PAYE: Use the tax code provided by HM Revenue and Customs (HMRC) to determine your income tax liability. The amount of PAYE you owe depends on your taxable income and the tax rates applicable to your income band. HMRC provides tax calculators and tax tables to assist with this calculation[link removed]
Posted Mon, 05 Jun 2023 15:30:42 GMT by HMRC Admin 8
Thank you for your question when you include the expenses would deprnd on whether you use cash basis or traditional accounting if the amounts are paid onece a year under cash basis its included in the accounts as its paid if paid prior to rental then its just included in your first years accounts as the full amount paid under traditional accounting  it would be when its accrued.
Thank you. 
Posted Thu, 06 Jul 2023 14:49:38 GMT by HMRC Admin 20
Hi JL,

Please contact us on 0300 200 3200 to discuss this further as we need further information.

Thank you.

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