Calculating your Income Tax

How your Income Tax is calculated

If you are paid weekly, your Income Tax is calculated by:

  • applying the standard rate of 20% to the income in your weekly rate band
  • applying the higher rate of 40% to any income above your weekly rate band
  • adding the two amounts above together
  • deducting the amount of your weekly tax credits from this total.

If you are paid fortnightly or monthly, the same principles apply.

You can find the rate band for the current tax year and the previous four years in the Tax rates, bands and reliefs charts. Your rate band will be notified on your Tax Credit Certificate (TCC).

The examples below show how this works. (Universal Social Charge (USC) is not included in them, but can be seen in Calculating your USC).

You can use this worksheet to calculate your tax.

Payroll tax is normally calculated using the ‘cumulative basis’ for each pay day. All income and tax credits from the previous 1 January are accumulated to ensure you have paid the correct tax. This ensures that you have received the benefit of all your tax credits to date.

Sometimes tax is calculated using the Week 1 basis. This means that each pay day is dealt with on its own, separate from previous weeks. Income and tax credits are not accumulated from 1 January.

Next: What is the difference between gross and taxable pay?