Online Calculators since 2009
You never know where you are until you know where you have been. As we discussed in the £40,000.00 Tax and Payroll Deductions Calculations, understanding your salary and payroll deductions is essential. In this suite of salary calculations we review and compare historical tax deductions with a view to providing insight into how tax and payroll deductions have influenced the take home pay of a £40,000.00 annual salary since 2022.
This PAYE calculation includes a table of tax calculations and graphical overview which details:
In order to provide a balanced comparison of historical salary deductions key factors are reverse engineered to provide a baseline. For example, a standard 1% company pension contribution in 2022 is applied against all historical tax years even though company pension schemes were not as legislated (Government encouraged) in 2022 as they are now. We still apply this percentage however to allow a like-for-like analysis.
You can view the same analysis and graphic example for an alternate salary by entering a new salary amount in the 'Generate a New Exampe' tool and clicking the generated salary link.
In this £40,000.00 Salary Calculation we have isolated the following payroll elements:
As Chart 1 demonstrates, salary deductions are designed to be in equal amounts each month. The aim being to provide a steady stream of income to the treasury throughout the tax year rather than waiting until the end of the tax year to collect income tax funds. This system suits the UK Government as they effectively have a quarterly budget they can work too, monitoring relative income tax streams to keep and eye on the employment metrics. The split approach also works well for employees as their tax is deducted as they earn rather than in one large lump at the end of the tax year.
Chart 1 uses a flat 12 split, that is the £40,000.00 and associated payroll deductions are calculated as 12 even splits. Not all employers pay an exact 12th of a salary each monthly, some prefer to pay a monthly split based on the number of days in the month, this is typically achieved by dividing the salary by the number of days in the year and then multiplying by the number of days in each month. Chart 2 illustrates how this affects the relative salary deductions and income tax streams to the treasury.
Chart 2 shows each amount payroll deduction per month in 2022 as calculated within the UK Tax Calculator 2022/23 based on a normal PAYE Employee earning £40,000.00.
Chart 3 provides a historical comparative analysis of an annual salary of £40,000.00. Below the chart are the comparative deductions and net pay amounts.
The Comparative analysis uses common taxable features and deductions which have altered as various chancellors have tinkered with the UK's payroll deductions. Common taxable features include Company Pensions, new legislation is increasingly pushing people and companies into company pension schemes and rather than opting in, every single employee needs to opt our (a headache for small, medium and large business who have additional payroll and administrative costs as a direct result). In contrast, it's good news for employees as they benefit from a better pension pot and, when they join a company pension scheme, their employers must contribute. This in affect means a larger salary.
Company Pension schemes have phased in since 2010, our figures apply the same pension factoring across the historical analysis, our aim being to facilitate a realistic comparison of PAYE, NIC's and the impact of changes to Personal Tax Free Allowance with the distortion of Salary Sacrifice Schemes.
|Adjusted Gross Income||38000|
|Tax Free Personal Allowance||12570|
|Company Pension: Employee||2000|
|Tax Due [PAYE]||5086|
|Company Pension: Employer||1200|
|Employers NIC Contribution||4024.08|
|Salary Package [Cost of Employee]||45224.08|
Most people will find that they actually pay less PAYE now than someone on the same salary would have paid a number of years ago but, in contrast, we all pay more National Insurance Contributions now than ever before. This is understandable given the increasing lifespan and the ever growing population in the UK.
Chart 4 illustrates how home of their gross income an individual earning £40,000.00 has historically received as take home pay (the money you receive into your bank after tax and payroll deductions have been made).
It is interesting to consider how your salary compares against previous years. The best approach to understand a £40,000.00 Salary and what it can buy you is to compare the salary against the annual inflation rate. The table and chart below provides historical salaries equivalent to a £40,000.00 Salary in 2022.
We hope your found this salary analysis useful, we welcome your feedback and are happy to provide additional information on this page to support your needs. If you require specific salary information or graphical payroll analysis please contact us. You may wish to browse the salary, payroll and payslip tools and information below
This PAYE Calculation provides an annual example of Salary Calculation for an Employee earning £40,000.00 per annum and is designed to provide a graphical illustration of the seperate Tax and Payslip elements. If you would like to see a periodic breakdown of the PAYE Calculation or view specific details of how each element of Tax, PAYE and NIC were calculated, please select one of the relevant calculations below.
The UK Tax calculator is updated for 2022/23 tax year and uses 2022/23 tax year as default to produce the PAYE Calculations, tax illustration and graphical overviews below.
If you have never really looked at your payslip or perhaps it's your first job and the first time you have looked at a payslip, it is worth spending a few minutes getting to know what the different deductions and payroll details are. Understanding your payslip and payroll deductions allows you to identify potential errors and know what to do when mistakes are made so you can claim back any overpaid tax. The guides below are easy to read and designed to provide a basic understanding of payslip and payroll deductions.
|What is Gross Pay?||What is Net Pay?|
|Employees National Insurance Contributions (NIC's)||Employers National Insurance Contributions (ENIC's)|
|What is PAYE (Pay As You Earn)?||Giving to Charity, what's in it for you?|
|State Pensions explained||Company Pensions explained|
|Tax Avoidance and Tax Evasion||What is my Tax Free Allowance?|
|How to pay less NIC's||Top 10 Tax Saving Tips|