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How to use Pay Calculator
Here’s how to use the Pay Calculator and what data you need to enter so that it can accurately calculate your salary. Let’s learn how to use it correctly.
Personal Allowance
The personal allowance is the amount of money you can earn each year without paying income tax.
For the 2024/25 tax year, the Personal Allowance is set at £12,570. If you earn less than this amount, you usually won’t owe any Income Tax.
This allowance can change in some situations. It might be more if you qualify for benefits like the Marriage Allowance or the Blind Person’s Allowance. But it can also be less if you’re a high earner or if you have unpaid taxes from a previous year. You can find your personal allowance using your tax code or visit gov.uk.
If your income is over £100,000, a different rule applies. For every £2 you earn above this amount, £1 is taken away from your £12,570 allowance. So, if you earn £125,140 or more, you will have to pay Income Tax on all of your income, and there won’t be any tax-free allowance left.
Tax Code
Your tax code is a series of numbers and letters that tells your employer or pension provider how much income tax to take from your salary or pension. HM Revenue and Customs (HMRC) is the government agency that decides which tax code should be used for you. And if you are looking for your tax code for the current year, you can check it online here.
Your tax code might have the prefix “S,” which means your income is taxable using the Scottish rate, or it might have the prefix “C,” which means your income is taxable using the Welsh rate (the same applies to England). The numerical part of the tax code represents your personal allowance divided by 10. For example, the tax code “1257L” indicates a personal allowance of £12,570. Your tax code usually follows this format, where * represents a numerical digit.
Tax Code List
| Tax Code | Details |
| ****L | Standard tax-free Personal Allowance |
| ****M | Marriage Allowance; 10% transfer of partner’s Personal Allowance |
| ****N | Marriage Allowance; 10% transfer of your Personal Allowance to partner |
| ****T | Tax code includes calculations for Personal Allowance |
| K**** | You have income that is not being taxed another way and it’s worth more than your tax-free allowance. |
| 0T | Personal Allowance used up or new job without tax code |
| BR | All income taxed at basic rate |
| D0 | All income taxed at higher rate (Intermediate Rate in Scotland) |
| D1 | All income taxed at additional rate (Higher Rate in Scotland) |
| D2 | All income taxed at top rate |
| NT | No tax on this income |
If your tax code ends in ‘W1’, ‘M1’, or ‘X’, you are on an emergency tax code. Please leave these out when entering them into the calculator.
If you have entered the tax codes BR/D0/D1/D2/NT, your dividends and savings interest will be taxed according to the normal tax band, and your personal allowance will be considered £0. Read our previously published article on Should i give my Salary to my Parents?
Income Tax
The determination of income tax is done using something called a tax band, which is set by the government and may change in the future. These tax bands are essentially different levels of income, and each of them has a corresponding tax rate or percentage.
Your income tax band can be used for all your taxable income, and this calculator prioritizes the following when using your income tax band:
- Salary
- Interest
- Dividends
For England, Wales, and Northern Ireland; Assume your tax code is 1257L.
| Taxable income | Tax rate | Band |
|---|---|---|
| Up to £12,570 | 0% | Personal Allowance |
| £12,571 to £50,270 | 20% | Basic rate |
| £50,271 to £125,140 | 40% | Higher rate |
| over £125,140 | 45% | Additional rate |
Note: If your tax code is different, you can use the table provided below to determine your tax band after deducting personal allowances from your taxable income.
| Taxable income above personal allowance | Tax rate | Band |
|---|---|---|
| £0 to £37,700 | 20% | Basic rate |
| £37,701 to £125,140 | 40% | Higher rate |
| over £125,140 | 45% | Additional rate |
For Scotland
Suppose your tax code is 1257L. Please note that if you are a resident of Scotland, your income from dividends, child benefits, and savings interest will still be taxed at England’s rates.
| Taxable income | Tax rate | Band |
|---|---|---|
| Up to £12,570 | 0% | Personal Allowance |
| £12,571 to £14,876 | 19% | Starter rate |
| £14,876 to £26,561 | 20% | Basic rate |
| £26,562 to £43,662 | 21% | Intermediate rate |
| £43,663 to £75,00 | 42% | Higher rate |
| £75,001 to £125,140 | 45% | Advanced rate |
| over £125,140 | 48% | Top rate |
Note: If your tax code is different, you can use the table provided below to determine your tax band after removing personal allowances from your taxable income.
| Taxable income above personal allowance | Tax rate | Band |
|---|---|---|
| £0 to £2,305 | 19% | Starter rate |
| £2,306 to £13,990 | 20% | Basic rate |
| £13,119 to £31,091 | 21% | Intermediate rate |
| £31,092 to £62,430 | 42% | Higher rate |
| £62,430 to £125,140 | 45% | Advanced rate |
| over £125,140 | 48% | Top rate |
Savings Rate Interests
You can earn up to £5,000 in interest without paying tax, which is known as the starting rate for savings. Assume you have a personal allowance of £12,570. If your other income reaches or exceeds £17,570, you will not be eligible for the starting rate for savings.
If your other income is less than £17,570, your starting rate for savings can be up to £5,000. For every £1 of other income above your personal allowance, your starting rate for savings is reduced by £1. Check our previously published article on How does salary pay work if you miss a day?
If we talk about the personal savings allowance, it includes; You may also be eligible for a personal savings allowance, which allows you to earn up to £1,000 in interest without paying tax. The amount you can claim depends on your income tax band. For residents of Scotland, the income tax band used for savings interest is the same as the rest of the UK. This calculator includes all your other income, such as dividends and allowances, for this calculation.
| Income Tax Band | Personal Savings Allowance |
|---|---|
| Basic rate | £1,000 |
| Higher rate | £500 |
| Additional rate | £0 |
Dividends Income
This pay calculator supports using your personal allowance as part of your dividend income. However, your salary and savings interest will be prioritized in using your personal allowance.
Your income tax band will be used for your salary/savings interest first, and then for your dividends. You get a £500 dividend allowance per year.
The tax on dividends is imposed in the following manner:
| Income Tax Band | Tax rate (%) |
|---|---|
| Basic rate | 8.75 |
| Higher rate | 33.75 |
| Additional rate | 39.35 |
Note: For residents of Scotland, the income tax band used for dividends is the same as the rest of the UK. This calculator includes all your other income, such as savings interest and allowances, in this calculation.
National Insurance rates and categories
The national insurance document provides various national insurance bands. We have created a list for this; by looking at it, you will easily understand.
| A | All employees not in groups B, C, H, J, M, V, or Z |
| B | Married women and widows with reduced National Insurance |
| C | Employees above State Pension age |
| H | Apprentices under 25 |
| J | Employees deferring National Insurance due to other job |
| M | Employees under 21 |
| V | Veterans in their first job after leaving the armed forces |
| Z | Employees under 21 deferring National Insurance due to other job |
| F | All freeport employees not in groups I, L, or S |
| I | Married women and widows in freeports with reduced National Insurance |
| L | Freeport employees deferring National Insurance due to other job |
| S | Freeport employees over State Pension age |
Employee National Insurance Rates
| Category letter | £123 to £242 (£533 to £1,048 a month) | £242.01 to £967 (£1,048.01 to £4,189 a month) | Over £967 a week (£4,189 a month) |
|---|---|---|---|
| A | 0% | 8% | 2% |
| B | 0% | 1.85% | 2% |
| C | N/A | N/A | N/A |
| F | 0% | 8% | 2% |
| H | 0% | 8% | 2% |
| I | 0% | 1.85% | 2% |
| J | 0% | 2% | 2% |
| L | 0% | 2% | 2% |
| M | 0% | 8% | 2% |
| S | N/A | N/A | N/A |
| V | 0% | 8% | 2% |
| Z | 0% | 2% | 2% |
About Pay Calculator / Salary Comparison
US Pay Calculator is a salary comparison and career resource website for both employees and employers. Here, you can find the average and median salaries for jobs in your area. You can benchmark your salary and calculate your rank to see approximately how much salary you will receive monthly, Hourly, yearly, and even weekly. You will also find a wealth of career resources and information to boost your career.
What are Pay Calculator sources for salary and income information?
We mainly use the information submitted by our users, but we also have a database of salary information collected from necessary agencies, companies, and employers. We combine this information to generate the most accurate results possible and also use highly sophisticated statistical formulas to ensure that the submitted data is not exaggerated.
How does Pay Calculator preserve my privacy?
This site will never ask you for any personal information. All the information you provide is general career-related questions and does not have any specific relation to you or anyone else. The general information you submit may be used to prepare statistical data. For more information regarding privacy, please read our privacy policy.
How can I benefit from the US Pay Calculator?
The prepared salary comparison report will contain valuable information about your salary and income status. The salary comparison report will tell you; the average salary for your job position in your country, the percentage of people earning less or more than you, the average salary for jobs related to your domain or area of expertise, and a list of job information submitted by other users.
