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Calculations

If you are dealing with your payroll electronically, then the software will perform
the required tax and NIC calculations automatically to help you reach the correct
amount to pay your employee, otherwise you may have to use HMRC’s tax and
NIC tables to help you make the correct deductions.
You can get the tax and NIC tables from GOV.UK:

www.gov.uk/government/collections/payroll-publications-for-employers

The tables work by telling you how much tax or NIC free pay your employee can
have in the pay period (which is determined by your employee’s tax code and
National Insurance category letter) so that tax and NIC at the appropriate rates
can be applied to the balance.

Most employees have National Insurance category letter A. HMRC have
developed a tool that you can use to work out their tax code:
www.gov.uk/new-employee-tax-code

For example, your employee has tax code 1185L in 2018/19 and NIC category
letter A. They are not a Scottish taxpayer (there are slightly different tax rates
in Scotland).
HMRC’s tax and NIC tables will tell you that your employee can have £228 of tax
free pay this week and £162 of NIC free pay.
If your employee earns £250 this week, then you will know from the tables that
your employee’s tax and NIC deductions should be:

The result is: Gross pay £250.00
Less Tax £ 4.40 (£250 – £228 x 20%)
Less NIC £ 10.56 (£250 – £162 x 12%)
Net pay £235.04

Benefits in kind

As well as paying your employee in cash, you may provide them with some
non-cash benefits or benefits in kind. Some non-cash benefits can count as
taxable pay for your employee too, as can expenses that you pay or reimburse,
but these aren’t always dealt with through the payroll and can be reported to
HMRC on form P11D at the end of the tax year as a separate process instead.

Your employee pays his or her tax liability on the non cash benefits straight to
HMRC, but you should be aware that there may be an employer National
Insurance liability for you to pay also (this is called Class 1A National Insurance.)

See the ‘End of year’ section of our website www.disabilitytaxguide.org.uk for
more on benefits in kind and expenses. Our benefits and expenses guide also
gives information on how benefits can be taxed via the payroll instead of using
the P11D system.

page 29 Taking on a personal assistant – a basic guide • Paying wages