There are important skills to learn when starting in payroll. Learn how to manually calculate income tax (PAYE) so you can verify tax deductions and explain the calculation to employees who query their pay. Calculate emergency tax manually Emergency tax is calculated on a period-by-period basis. It uses only the employee’s taxable pay for the current period. The calculation doesn't include any pay from earlier in the tax year. If the employee provides a PPSN, apply emergency tax using the single person's rate band for the first four weeks. If they do not provide a PPSN, tax all income at 40% with no tax credits. ▼Example - A weekly employee earns €1,500.00 this pay period
- They pay €100.00 towards a pension
- This is the second week you pay the employee
- The weekly Tax Rate 1 cut-off point is €846.16, and no tax credits apply
- The employee has provided their PPS number
Manual calculation | Calculation step | Amount (€) | Notes | | Gross pay this period | 1,500.00 | | | Non-tax deductions | (100.00) | Pension | | Taxable pay | 1,400.00 | | | Tax Rate 1 cut-off point (846.16 @ 20%) | 169.23 | For employees with a PPSN and no RPN, apply the single person's tax cut-off point during the first four weeks of employment. | | Balance (553.84 @ 40%) | 221.54 | | | Gross tax due | 390.77 | | | Tax credits | 0.00 | Emergency tax, so no tax credits are applied | | Total tax due this period | 390.77 | | Calculate Week 1 / Month 1 tax manually Week 1 / Month 1 tax also calculates on a period-by-period basis. It uses only the taxable pay for the current period and ignores any pay from earlier in the tax year. ▼Example - A weekly employee earns €1,500.00 this pay period and pays €100.00 into a pension
- This is the second week you pay the employee
Before you calculate Week 1 / Month 1 tax Find the employee’s tax details for the current period. | Employee tax allowance | Yearly value | Weekly value | | Tax rate 1 cut-off point | 44,000.00 | 44,000 ÷ 52 = 846.16 | | Tax credits | 4,000.00 | 4,000 ÷ 52 = 76.92 | Manual calculation | Calculation step | Amount (€) | Notes | | Gross pay this period | 1,500.00 | | | Non-tax deductions | (100.00) | Pension | | Taxable pay | 1,400.00 | | | Tax Rate 1 cut-off point (846.16 @ 20%) | 169.23 | | | Balance (553.84 @ 40%) | 221.54 | | | Gross tax due | 390.77 | | | Tax credits | (76.92) | | | Total tax due this period | 313.85 | | Calculate normal tax manually Normal tax is calculated on a cumulative basis. It uses year-to-date pay and tax values rather than the current period only. The calculation includes all pay and tax to date, even if part of it relates to previous employment. ▼Example - You’re processing period 34 in a weekly payroll
- The employee earns €1,00.00 this pay period
- The employee pays €100.00 into a pension each week
-
The employee earned €29,000.00 and paid €2,500.00 in tax by period 33 -
The employee's yearly Tax Rate 1 cut-off point is €44,000.00 -
Their yearly tax credits are €4,000.00 Before you calculate normal tax Confirm the employee’s cumulative tax allowances up to and including the current period. Calculate cumulative allowances by multiplying the annual value by the current pay period and dividing by 52. | Employee tax allowance | Yearly value | Weekly value | | Tax rate 1 cut-off point | 44,000.00 | 44,000 × 34 ÷ 52 = 28,769.23 | | Tax credits | 4,000.00 | 4,000 × 34 ÷ 52 = 2,615.38 | Manual calculation | Calculation step | Amount (€) | Notes | | Gross pay this period | 30,000.00 | 29,000.00 + 1,000.00 | | Non-tax deductions | (3,400.00) | Pension contributions to date (34 × 100.00) | | Taxable pay | 26,600.00 | | | Tax Rate 1 cut-off point (26,600.00 @ 20%) | 5,320.00 | Taxable pay is below the cumulative cut-off point | | Balance (@ 40%) | 0.00 | | | Gross tax due to date | 5,320.00 | | | Tax credits (76.92 × 34) | (2,615.38) | | | Total tax due to date | 2,704.62 | | | Tax paid in previous periods | (2,500.00) | | | Total tax due this period | 204.62 | | The total tax paid to date includes all PAYE deducted in the current tax year. This includes tax from your employment and any previous employment. If you’re unsure of this figure, open the employee’s previous payslip and check Cumulative Details, then Tax Paid. |