Welcome to iknowtax.com where you will find Tax and NI calculators containing the latest official rates from the HMRC. It allows you to calculate your net income after tax and see what the taxman is taking. You will find lan easy to understand table showing the tax rates for 2018 - 2019 and the previous years.

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See http://iknowtax.com/2020 for 2020 to 2021 tax calculator

National minimum wage rates per hour from April 2018:

• �7.83 for 25 years and older
• �7.38 for 21 - 24 years old
  
• �5.90 for 18 - 20 years old
  
• �4.20 for under 18 years old
  
• �3.70 for apprentice

How is tax calculated? I'm confused 😕

🤔It's a myth: It is sometimes better to not earn more, by getting a higher paid job or a second job because you will lose out by paying more tax

🤔Also it is not true that student do not get taxed. Students do get taxed like everyone else once their earning has gone above the tax free personal allowanace and tax free NI thresholds. As students usually work part-time hours they earn less which is usually below the personal allowance amount which is tax free thinking they dont get taxed. When they earn more during holidays by working more hours their pay goes above the tax free threshold and get taxed.

Personal Allowance 2018 - 2019

What is Personal Allowance? Personal Allowance is the portion of your earning where tax is not applied, making that portion of your earning tax free.

Earning	Personal Allowance (per year)
If you are earning up to �100,000	�11,850
If you are earning between �100,000 and �123,700	Decreases from �11,850 by 50% of every pound you earn (above �100,000) until it reaches �0
If you are earning �123,700 or more	�0
Blind person receive an additional amount of �2390 on top of the personal allowance

See example #1

Taxable Income/Income Tax

Taxable income is your earning where tax can be applied to.
These are some that counts as taxable income: income from employment, self employment/partnership, pension, investment earning, rental property, state benefits. For more information visit: https://www.citizensadvice.org.uk/debt-and-money/tax/what-is-taxable-income/taxable-and-non-taxable-income/.

Tax Rates 2018 - 2019

These rates apply to different portions of your earning

Your earning [per year after taking away your Personal Allowance amount from your earning]	Tax Rate 2018 - 2019	That is
Under your Personal Allowance amount	No tax taken	�0
�0 - �34,500	20%	Basic rate
�34,501 - �150,000	40%	Higher rate
over �150,000	45%	Additional rate

Example: Salary minus Personal Allowance: �35,000 - �11,850 = �23,150.
So on �23,150, 20% tax rate will apply as you can see on the table above this amount falls between �0 - �34,500.

Example 2: Salary minus Personal Allowance: �50,000 - �11,850 = �38,150.
On this amount (�38,150), 20% will be applied to up to �34,500 and on the remaining amount it will be 40%.
Like this: 20% of �34,500 (out of �38,150), and 40% of �3650 (remaining of �38,150 minus �34,500). So the tax paid will be �8360. See the illustration below.

See example #4 | Does Tax or NI come out first?

National Insurance Rates 2018/2019

National Insurance Contribution is payable by everyone, until you have reached the state retirement age. National Insurance pays for your state pension and other state benefits.

These rates apply to different portions of your earning

Your Earning [Per year]	National Insurance Rate	That is
Earnings up to �8424	0%	No National Insurance contribution is payable
Earnings between �8424 and �46,384	12%	Salary minus �8424 = X, 12% of X
Earnings �46,384 or more	2%	�46,384 minus �8424 = �36,868, 12% of �37,960 plus salary minus �46,384 = X, 2% of X

Below the above table is presented in a different way (it makes it a little easier to see how to apply NI rates on your earning) :

Your Earning [Per year, after subtracting �8424]	National Insurance Rate	That is
Below �0	0%	No National Insurance contribution is payable
Between �0 and �37,960	12%	Salary minus �8424 = X, 12% of X
Between �37,960 or more	2%	�46,384 minus �8424 = �36,868, 12% of �37,960 plus salary minus �46,384 = X, 2% of X

How to calculate tax?

Here are examples of how Tax and NI is calculated, so you can work out your take home/net pay:

#01 If I earn �5000 per year, how much tax do I pay:
You have personal allowance of �11850.
Because your salary is below the Personal Allowance amount, you will not pay tax.
Salary minus Personal Allowance; �5000 - �11850 = below �0, so there is no amount left to tax on.
You will also not pay any National Insurance contribution because you are earning below �8424.
So you keep exactly �5000.

#02 If I earn �15,000 per year, how much tax do I pay:
You have personal allowance of �11850.
Now to calculate how much tax is due from you, you need to take away Personal Allowance amount from your salary (Salary minus Personal Allowance): �15,000 - �11850 = �3150
So �3150 is the amount where tax will be taken from.
The tax rate will be for you is 20%.
So 20% of �3150 is �630 (�3150 � 0.2 = �650). So the tax due is �630.
Now to see how much money is left for you to take home, you need to also calculate the amount of National Insurance contribution that will be taken from you.
Your salary is more than �8424 and less than �46,384 so the National Insurance rate will be 12%.
Any amount below �8424 you don't pay National Insurance.
So to apply the 12% rate you will need to deduct �8424 from your earning.
That will be �15,000 - �8424 = �6576. �6576 is the mount where the 12% will be applied to deduct the amount for NI. So 12% of �6576 is �789.12 (�6576 � 0.12 = �789.12).
Now you can work out how much you take home/ your net pay: Salary - Tax - NIC:
�15000 - �630 - �789.12 = �13,580.88

Is NI deducted after taking out tax? NI is not deducted after your tax, or vice versa. -NI is not calculated and deducted on your earning remaining after the tax deductions. The NI calculations are applied to your full amount of your salary.

#03 If I earn �25000 per year, how is tax and NI calculated:
Your personal allowance is �11,850.
Subtract your Personal Allowance amount from �25,000.
�25,000 - �11850 = �13,150
Now on �13,150 is where the tax will be deducted from. 20% tax rate will apply.
20% of �13,150 is �2,630. �2,630 is deducted for tax.
For National Insurance (NI); Subtract �8424 from �25,000.
That equals to �16,576. On this amount 12% will be deducted for NI.
12% of �16576 is �1989.12. For NI �1989.12 is deducted.
Total deduction is �2630 + �1989.12 = �4,619.12.
You take home �20,380.88

Old rate is used below:

#04 If I earn �60,000 per year, how is tax and NI calculated:
Your personal allowance is �10000.
Tax rate of 20% and 40% will apply. See the Tax Rates table above
To calculate how much tax is due from you, you need to take away your Personal Allowance amount from your salary: (Salary minus Personal Allowance); �60,000 - �11,000 = �49,000.
�49,000 is the amount where tax will be applied to.
Now 20% tax rate is applied to �32,000 out of �49,000. See the Tax Rates table above.
So 20% of �32,000 is �6400 (�32,000 � 0.2 = �6400).
Now 40% tax rate is applied to the amount over �32,000 (of �49,000), that is �17,000 (�49,000 - �32,000 = �17,000).
So 40% of �17,000 is �6800 (�17000 � 0.4 = �6800).
Total tax due is �13,200 (�6400 + �6800).
For National Insurance contribution, 12% rate is applied to salary between �8060 and �43,004 and the 2% rate is applied to amount of the salary above �43,004.
Earning below �8060 you don't pay National Insurance contribution.
So the the 12% rate will apply to amount between �8060 and �43,004 of your earning. And 2% above �43,004.
Amount between �8060 and �43,004 is �34,944 (�43,004 - �8060).
On �34,944 12% is deducted. 12% of �34,944 is �4193.28 (�34,944 � 0.12).
The 2% rate applies to your earning from �43,004 to �60,000. Which is �16,996 (�60,000 - �43,004).
2% of �16,996 = �339.92 (�16,996 � 0.02).
For National insurance contribution; �4533.20 (�4193.28 + �339.92) is deducted from your earning.
Finally you can work out how much you take home: [Salary] - [Tax] - [NIC]:
�60,000 - �13,200 - �4533.20 = �42,266.8

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Kashem Shah