Introduction to Income Tax and NICs Pay As You Earn and income tax
that the correct tables are being used. The date that the tables come into effect from is shown on the front cover.
There are two sets of tables used in calculating PAYE: the Pay Adjustment Tables and the Taxable Pay Tables (available on GOV.UK at https://www.gov.uk/government/publications/tables-a-pay-adjustment-tables and https://www.gov.uk/government/publications/taxable-pay-tables-manual-method .
5.9.1 Pay Adjustment Tables
The purpose of the Pay Adjustment Tables
The Pay Adjustment Tables are used to work out:
• T he ‘ tax- free pay’ of employees whose tax codes have a suffix L, M, N, or T (not NT)
• T he ‘additional pay’ of an employee with a prefix K , SK or CK tax code.
For each tax week and tax month, the first column in these tables show (in bold print) codes applicable to individual employees, which correspond with: • For suffix codes, the amount of positive pay adjustment to be deducted from the employee’s normal taxable pay at that point in the tax year • For codes with a K (or SK) prefix, the amount of negative pay adjustment to be added to the employee’s normal taxable pay at that point in the tax year.
Finding the pay adjustment figure
In the column headed ‘code’, t urn to the week or month number that the pay day falls in and find the number of the employee’s PAYE code (ignore the letter). The amount of positive or negative pay adjustment to date is shown to the right of the code. If the code is higher than 500, then the total pay adjustment is obtained by adding together two or more amounts of pay adjustment calculated as follows: • Divide the code into units of 500 and calculate the adjustment in two stages (for example, 1,030 = 500 x 2 and 30) ‒ Stage 1: multiply the figure given in the box in the bottom right corner of the table by the number of units of 500 (which is 2 in this example) ‒ Stage 2: look up the amount of pay adjustment in the main lookup tables for the remainder (which is 30 in this example). Note that one figure must come from the table itself. If the number in the tax code is exactly divisible by 500 leaving no remainder, then one of the units of 500 must be read from the table, and the figure in the box must be multiplied by however many units of 500 remain. For example, if the tax code number is 1500, which is
page 46 of 60
Made with FlippingBook - Online magazine maker