My wife has a tax code of 657L. She's already been paid in February but, for reasons best known to themselves, her employers have chosen to pay her annual bonus as a separate payment, complete with separate wageslip etc etc. The bonus was £239.93 and there are deductions of £48 (PAYE) and £26.39 (NI). She's a basic rate tax payer and thinks (well, the entire staff thinks!) that the deductions are way too high. Any thoughts anyone? Thanks in advance.

They're spot on. As it's an extra payment none of the allowance will be used against it (the pay period will be the same as that of the Feb pay). Tax 240*0.2 = 48.00 [PAYE works on whole pounds to date] NI 239.93*0.11 = 26.39

Does this tax/NI deduction seem right?

Feb 27, 2010 24 Replies

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Peter Saxton 16 years ago

Using your logic, any method can be described as somehing else by simply using maths to make the subject something else.

What we presently do is take the chronological proportion of the relevant allowances and bands and use them to calculate the tax. The calculation doesn't work out the expected annual pay at all. You can tell that by looking at the tax tables.

What you have said is a bit like saying that instead of simply measuring the length of a car you actual incorporate the size of the earth into the calculations using multiplicating and divisionto arrive at the conclusion!

Relax, I'm being serious.

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Ronald Raygun 16 years ago

Maths can't change the facts. You can call a method what you like, and describe it in any way you like, but if you have two methods which give he same result despite having different descriptions, then they are equivalent.

I know it doesn't, it doesn't need to, and I didn't say that it did.

I merely noted that in effect it makes the implicit assumption (even if not intentionally) that the annual pay is going to be that amount of which pay to date is the chronological proportion.

The point is that *if it did* work out the expected annual pay, and applied the full allowances and tax bands to that amount, to calculate the putative annual tax, and took the "to date" proportion of that, it would get the same result.

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Andy Pandy 16 years ago

Or even 70% if they're claiming tax credits and get more than the family element.

And if we don't vote for change it'll get much much worse. They've already promised a rise in NI next year.

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Peter Saxton 16 years ago

And if we doubled the income and deducted half the income for the "elephant allowance" that would arrive at the same amount!

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Ronald Raygun 16 years ago

Er, just testing.

I hope you get weller soon.

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