Methods of calculating tax
Rule for calculating tax
Note
The information on this page refers to current employer obligations. For employer obligations before 1 January 2019, please see the Employers Guide to PAYE.
This is how an employee's income tax is calculated if they are paid weekly:
- apply the standard rate of tax on their taxable pay up to their weekly cut-off point
- apply the higher rate of tax on the balance of taxable pay above their weekly cut-off point
- add the two amounts above
- subtract the amount of their weekly tax credits.
If an employer pays their employees fortnightly or monthly, the same principles apply.
Calculating your income tax gives examples of how this works from an employee's perspective. It also explains tax credits, tax cut-off points and Universal Social Charge (USC) cut-off points.
The amount of an employees' cut-off points and tax credits applied in any pay period are decided by their tax basis. The next sections tell you what each basis is for and how it affects tax.
Next: Cumulative basis