UK PAYE Tax and NI Tables - Tutorial 1, Free Pay using pay adjustment tables and a calculator.

In this series of videos I will show you How to manually work out PAYE Tax and National insurance deductions using tables and a calculator.

There are three parts:
Tutorial 1, Free Pay using pay adjustment tables and a calculator.
Tutorial 2, Tax using tables and a calculator.
Tutorial 3, National Insurance using tables and a calculator.

This first tutorial will focus on how to work out free pay using the pay adjustment tables supplied on HMRS website, (Find the link in the description)
http://www.hmrc.gov.uk/taxtables/pay-....

Free pay must be calculated first, because tax is worked out on your gross pay, minus free pay.
The amount of free pay your allowed is calculated using the numeric part of your Tax code.
Free pay is then divided equally throughout the year per pay period.

For an easy Example of a Tax code under 501, we will use 480L for a monthly paid employee, for a weekly paid employee apply the same formulas using the weekly table.

480L (Pay Adjustment Table Page 57)

1. Look up 480 in the code column on the appropriate page per pay period and frequency.
2. The amount of free pay to date is shown to the right of the code. 400.75

Using a calculator
Monthly Total Free Pay = 480 X 10 + 9 / Months(12) Rounded-Up
Weekly Total Free Pay = 480 X 10 + 9 / Weeks(52) Rounded-Up

Tax codes over 500 are a bit more complicated, we will use 810L as the tax code for a monthly paid employee. The same applies for weekly paid employees but use the weekly look-up table.

810L (Pay Adjustment Table Page 57)

1. Divide the code into units of 500 and note the number of units and the amount left over.
for code 810 the number of units of 500 is one and the remainder is 310.
2. look up the amount of pay adjustment from the appropriate look-up Table for the remainder. (310 in this example = 259.09)
3. Multiply the figure given in the box marked '*' at the bottom of the page by the number of units of 500. 416.67 X 1 = 416.67
4. Add these two amounts together. 259.09 + 416.67 = 675.76

Using a calculator to work this out, again -
Divide the code into units of 500 and note the number of units and the amount left over.
Units: 1
Remainder: 310
Monthly Total Free Pay = 416.67 X Units(1)
(Remainder(310) X 10 + 9 / Months(12)) Rounded Up

For the weekly values change 416.67 to 96.16 and 12 to 52.

Weekly Total Free Pay = 96.16 X Units(1)
(Remainder(310) X 10 + 9 / Weeks(52)) Rounded Up

In this last example, the Tax code is over 500 but divides exactly into units of 500. we will use 1500L as the tax code for a monthly paid employee. Same again for Weekly.

1500L (Pay Adjustment Table Page 57)

1. divide the code into units of 500 and note the number of units is 3
2. look up the amount for one unit of 500 from the appropriate look-up Table 417.42
3. multiply the figure given in the box marked '*' at the bottom of the page by the number of remaining units of 500. 416.67 X 2 = 833.34
4. Add these two amounts together. 417.42 + 833.34 = 1250.76

Using a calculator is exactly the same as the previous example, but we have more units and no remainder.
Divide the code into units of 500 and note the number of units
Units: 3.
Monthly Total Free Pay = 416.67 X Units(3)
(Reminder(0) X 10 + 9 / Months(12)) Rounded Up

Again for the weekly values change 416.67 to 96.16 and 12 to 52.

Weekly Total Free Pay = 69.16 x Units(3)
(Reminder(0) X 10 + 9 / Months(52)) Rounded Up

For more information about your tax code see this video "What Dose My Tax Code Mean?"
In the next video I will show you how to use the tax table...