Methods of calculating tax

Rule for calculating tax


The information on this page refers to your current obligations. For your obligations before 1 January 2019, please see the Employers Guide to PAYE.

This is how your employee's tax is calculated if you pay them 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 you pay your 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 and tax and Universal Social Charge (USC) cut-off points.

The amount of your 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