The UK Pay As You Earn (PAYE) system should be just a question of simple arithmetic so that checking your tax should be easy. In reality it is not, because of all the if's and but's, poking and prodding that various governments have introduced over the years. At its heart what happens is that you add up all your income, every last little bit of it, take away your Personal Allowance and what is left is taxed. If only it was that straightforward.
This year brings new challenges from the Chancellor, for pensioners in particular and this calculator was drawn up with pensioners in mind. This is why no mention is made of Child Tax Credits, a minefield not covered here. The basic principle remains namely, if all you have is a single income as a wage earner ( sometimes known as being 'on the cards' ) with the tax taken off your wages by your employer and you are under 65, then it is simple. Take 10000 off your annual wage and tax whats left at 20%. Fewer and fewer people fit into this category. If your income is above £41866 then you have some of it taxed at 40%. Our sympathies to the 45% tax payers.
Pensioners are the hardest hit with the continuing erosion of the differential the over 65's enjoyed with an age related personal allowance above the basic allowance. This is disappearing as the basic allowance grows to equal the pensioners higher allowance, with the qualifying date for applicability being set at being born prior to 6 April 1948. This year the difference is reduced to £500 for those who were born before 6 April 1948 and £660 for those born before 6 April 1938. The Chancellor has already annouced that in the next tax year (April 2015 - April 2016) the basic personal allowance will be 10500, equalling the Pensioner's higher figure. The effect of this is to increase the amount of tax paid by older pensioners. The State Pension continues to be taxed but the Government does not do this at source, so the Tax Authorities must fiddle with the calculation of Personal Allowance to adjust for your OAP. You may have built up more than one pension over your working life for which individual tax codes must be produced. To cap it all, if your income exceeds £27000 then the Personal Allowance is reduced by £1 for every £2 over the limit. The problem with taxing the State Pension is not the only Government payment to fall into this category, some items of Universal Benefit are also paid without tax being taken off, only for the Revenue to start taxing it once you earn enough to be above the basic Personal Allowance. What a mess.
To try and help you check that the amount of tax you are paying is correct, use the calculator below. If you find that there is a discrepancy of more than £25 then check that you have entered all the figures correctly and if after you have made this check, there is still a big difference, seek advice, possibly from Tax Help for Older People at www.taxvol.org.uk if you are an oldie, otherwise have a word with your wages department.
NOTE : Whilst every effort is made to make this tax checker as accurate as possible, there can be so many variations some will slip through the net. Always get differences between the calculator and your tax bill checked before contacting the revenue. No responsibility is accepted for miscalculations. Genuine errors or problems with the calculator should be notified to