Methods of calculating tax
Tax exemption and marginal relief
Some employees are entitled to tax exemption each year. Similarly, some employees are exempt from Universal Social Charge (USC).
You should only apply tax exemption if you are instructed to do so on the employee’s Tax Credit Certificate (P2C).
Where tax exemption applies, it is not an instruction that tax is not to be deducted (unlike USC). Instead, the employee is given a special-amount cut-off point and tax credit on their P2C, and the higher rate of tax to be applied is the marginal relief rate of 40%.