Calculations

The instructions on this page are only for you if HMRC have agreed you qualify to file on paper.

Paper filing means that you send the information about your employee and the payments you make to them to HMRC on paper. The process described here, for working out the deductions that you need to make from your employee’s pay each pay day, applies under the RTI paper process from 6 April 2014.

Basics of calculating pay
Recording pay details
Working out tax, NIC and student loans
Reporting to HMRC

Basics of calculating pay

This section of the site tells you how to calculate and record down the right deductions on your employees pay. At this stage, you may find the following basic information useful:

  • Details of what counts as pay are given here. Broadly it covers all cash payments, wages, salary, overtime payments and bonuses. 
  • Remember that the payment of expenses and benefits in kind can count as pay too, but these are usually reported to HMRC at the end of the tax year on a form P11D, as a separate process rather than accounted for through the payroll. 
  • National Insurance contributions are made up of two elements: employee’s contribution, which you deduct from your employees pay, and employer’s contributions, which you may have to pay. 

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Recording pay details

You should have already set up a form RT11 deductions working sheet for your new employee. Please remember that an RT11 is just a tool for you to use to help you run your payroll. It does not need to be sent in to HMRC at any stage, however you will need to keep it somewhere safe, as the data on it will form part of your payroll records

On each pay day the following details, along with some others, must be recorded carefully in the RT11 working sheet:

  • Amount of pay
  • Tax deducted
  • Employers National Insurance contributions
  • Employees National Insurance contributions
  • Any Student Loan deductions

HMRC should send all the forms and guidance you will need, including RT11 – they are not available from HMRC’s website. Otherwise, they are available from the Employer Orderline to those employers who HMRC have agreed can use paper forms.

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Working out tax, NIC and Student Loans

Each pay day you will need to work out the correct deductions to make from your employee’s pay. You can use HMRC'S ‘tables’ (we have explained how the Student Loan Deduction Tables work below – all the ‘tables’ work in a similar way) which you can get by following the links below, to calculate the tax and other deductions:

  • SL3 Student Loan Deduction Tables (you go to the table which corresponds to your employee’s plan type and look up the amount of weekly or monthly earnings in the left hand column to find the corresponding Student Loan deduction in the right hand column. If the exact amount of earnings isn’t shown, look for the nearest figure below and use the amount of Student Loan deduction shown for that range of earnings)
  • National Insurance contributions Tables A to J (for most men and women aged 16 or over and under state pension age you will use category A) 
  • Tax Pay Adjustment Tables (to work out how much tax free pay they should get in that pay period)
  • Taxable Pay Tables (to work out the marginal tax rates to apply to the balance).

If you do not have internet or printer access you can order paper copies from HMRC's Employer Orderline.

We have only given a brief outline here of the first steps to take. More detailed information is provided by HMRC in guide RT7 – Guidance for employers exempt from filing Real Time Information online.

Tip: a quick and easy way to work out the tax and NIC deductions as an alternative to using the tables (or to just double check your workings from the tables) is to use the standalone calculators on GOV.UK’s website.

The calculators will work out the amounts for you and will give you the figures that you need to enter into the various columns of the RT11. These do not need to be downloaded from the GOV.UK website. 

Please note that despite the reference to the calculators being for the 2015/16 tax year, they do appear to work with 2016/17 rates and allowances.

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Reporting to HMRC

Once you have worked out how much you need to deduct from your employees pay, you have to pay your employee the ‘net’ amount and pay to HMRC the correct amounts of tax, National Insurance and Student Loan deductions. See our section on paying HMRC for more information.

The reporting of the actual payments to HMRC, will happen once a quarter on form RT2.

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