1. What is PAYE Tax?

PAYE (Pay As You Earn) is the system used in the UK to collect Income Tax and National Insurance from employment. Tax is deducted directly from your salary before you receive it.

2. How Does the Calculator Work?

The calculator uses the PAYE tax formula:

Where:

• \( income \) — Gross annual income (GBP)
• 12570 — Personal allowance threshold
• 37700 — Basic rate band width
• 50270 — Higher rate threshold
• 74870 — Higher rate band width
• 125140 — Additional rate threshold

Explanation: The formula calculates tax in three bands: basic rate (20%), higher rate (40%), and additional rate (45%), applying each to the relevant portion of income.

3. Importance of Tax Calculation

Details: Accurate tax calculation helps individuals understand their take-home pay, plan finances, and ensure correct tax deductions throughout the tax year.

4. Using the Calculator

Tips: Enter your gross annual income in GBP. The calculator will compute the total tax amount based on current UK tax bands and rates.

5. Frequently Asked Questions (FAQ)

Q1: What is the personal allowance?
A: The personal allowance is the amount you can earn each tax year without paying income tax. For 2023-24, it's £12,570.

Q2: How are the tax bands applied?
A: Income is taxed in portions: the first £12,570 is tax-free, next £37,700 at 20%, next £74,870 at 40%, and anything above £125,140 at 45%.

Q3: Does this include National Insurance?
A: No, this calculator only computes income tax. National Insurance is calculated separately and also deducted through PAYE.

Q4: Are tax bands the same across the UK?
A: No, Scotland has different income tax bands and rates. This calculator uses rates for England, Wales and Northern Ireland.

Q5: When do tax bands change?
A: Tax bands and rates are typically announced in the annual Budget and apply from the start of the next tax year (6th April).