⚠️ Our Disability Tax Guide guidance has moved to the LITRG website. If you have a query about any of the issues we cover in this section, please let us know by filling in the Contact Us form.
Preparing calculations: paper filers
Taking on an employee
This page tells paper filers how to calculate and record the right deductions from their employee's pay.
If you are an online filer, your payroll software will do the calculations for you.
Recording pay details
As a consequence of taking on your new employee, you should have already set up a form RT11 deductions working sheet for them. 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:
- Amount of pay: details of what counts as pay are given in our section How the Pay As You Earn system works. Broadly it covers all cash payments, wages, salary, overtime payments and bonuses.
- Tax deducted – see below
- Employers National Insurance contributions – see below
- Employees National Insurance contributions – see below
- Any student loan deductions – see below
HMRC should send you all the forms and guidance you need to run your payroll, including RT11 – they are not available on GOV.UK. Otherwise, they are available from the Employer Orderline to those employers who HMRC have agreed can use paper forms.
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’, which you can get by following the links below, to calculate the tax and other deductions:
- National Insurance contributions Tables (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) – an example of how these work is below.
- Taxable Pay Tables (to work out the marginal tax rates to apply to the balance) – an example of how these work is below.
- 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 is not shown, look for the nearest figure below and use the amount of student loan deduction shown for that range of earnings)
Our payroll calendar can help you with your calculations - you will need to know in which tax period your employees pay date falls so that you can manually calculate their tax deductions.
Example (please note that we do not consider National Insurance or other deductions in this example)
Jane pays her weekly paid employee, Jude, on Friday 3 June 2022 – looking at our tax calendar, Jane can easily identity that this is in week 9.
This is worked out as follows:
- Divide the code (1257) into units of 500 and note the number of units and the amount left over – for example, for code 1257 the number of units of 500 is 2 and the remainder is 257.
- Look up the amount of pay adjustment from the main look-up table for week 9, for the remainder (257 in this example). This is £446.40.
- Multiply the figure given in the box marked ‘*’ at the bottom of the week 9 page (£865.44) by the number of units of 500.
- Add these two amounts together. Thus, for code 1257 at week 9, the tax-free pay is £2,177.28 (£865.44 x 2 plus £446.40).
Jane’s payment to Jude on 3 June 2022 brings Jude’s total pay to date to £2,000.00 – as such, there is no need for Jane to withhold any taxes from Jude’s pay on that date, as the total amount of Jude’s earnings are less than the tax-free pay amount.
For completeness, if Jude’s pay, as at 3 June, was £2,300 in total, then her total taxable pay would be £122.72 (£2,300 minus £2,177.28). This means Jude has to pay tax on £122.72 of her earnings.
By using the Taxable Pay Tables for 2022/23, Jane would be able to work out that Jude’s tax is £24.40, as follows:
- She uses Table B on pages 6 and 7 (the instructions tell you to use this if your employee is an English, weekly paid, basic rate taxpayer (as Jude is)).
- The nearest round figure below £122.72 is £100. The tax due on £100, per Table B is £20.
- Then Jane uses Table B for the remainder of £22 (you ignore the pence). That’s £4.40.
- In total Jude’s tax is £24.40.
If you do not have internet or printer access you can order paper copies of the tables 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.
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.
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 give them a payslip.
Sending the information to HMRC
The reporting of the actual payments and deductions to HMRC will happen once a quarter on form RT2.
You must remember to pay HMRC the correct amounts of tax, National Insurance and student loan deductions. See our section on paying HMRC for more information.