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Calculating PAYE deductions (paper methods)

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Calculating PAYE deductions (paper methods)

Calculating PAYE deductions (paper methods)

Whenever you pay an employee, you'll need to work out the PAYE (Pay As You Earn) tax that you need to deduct. You'll also need to enter the relevant figures on the employee's form P11 Deductions Working Sheet.

If you use paper P11s, you can work out the tax due using the free calculators available on our website and on the Employer CD-ROM. Alternatively, you can work out the figures manually using tax tables. Using the calculators will save you time and help you get everything right.

As an alternative to paper methods you might consider using either a commercial payroll software package or our free P11 Calculator. Tools like these work out the PAYE figures automatically. They may also let you seamlessly file your Employer Annual Return (forms P35 and P45) online. It is the intention that all employers must file the Employer Annual Return online from April 2010.

On this page:

Paper P11 option 1 - using the PAYE tax calculator
Paper P11 option 2 - using the PAYE tables only or with the Pay Adjustment calculator
Using the Pay Adjustment calculator to complete Columns 4a/4b
Using Taxable Pay Tables to complete Column 6
Practical examples showing you how to complete columns 2 to 8
Non-standard pay days or pay intervals and non-cash pay
Benefits of using non-paper methods for the P11

Paper P11 option 1 - using the PAYE tax calculator

You can use our free PAYE tax calculator to work out the tax you need to deduct from each employee's pay. The calculator will also work out the figures you need to put into Columns 3 to 8 of the employee's P11. You can use the calculator on our website or on the Employer CD-ROM.

The calculator works in the same way as the tables. You can use it for all tax codes, including K codes and codes BR, D0 and NT. It will save you the job of using the tables and doing the calculations yourself. But you'll still need to record the entries manually on the P11.

Information needed for the calculator

You'll need each employee's P11 Deductions Working Sheet or equivalent and their wage records to work out the tax due using the PAYE calculator.

You'll have to enter the following information for each employee:

their tax code - get this from their P45 or P46 if they're new
the pay period interval - weekly, two weekly, monthly or four weekly
whether the tax code is applied cumulatively or on a week 1/month 1 basis - get this from their P45 or P46 if they're new
their gross pay for the week or month
their gross pay to date - from Column 3 of the P11
their previous total tax to date - from Column 6 of the P11
for K codes only, the tax not previously deducted due to the regulatory limit (more below) - from Column 8 of the P11
the payment date in DD/MM/YYYY format

If the employee has a K tax code, you're not allowed to deduct more than 50 per cent of their pay in tax. This is known as the 'regulatory limit'. If this limit's exceeded, enter the tax you couldn't deduct in Column 8 of the P11 and deduct it in the next pay period(s).

It's really important to use the right tax code to make sure the calculator works out the tax accurately.

Find out which tax code to use for an employee

Use the PAYE tax calculator on the HMRC website

Go to an example of a completed P11 showing PAYE deductions

Limitations of the PAYE calculator

Our free PAYE tax calculator does have some limitations. For example, you can't use it if you operate a net pay arrangement. Instead, follow the instructions in our helpbook E13 'Day-to-Day Payroll'.

The calculator won't let you save the results of the calculations directly - but you can copy and paste them into another application to save them.

Go to helpbook E13 'Day-to-Day Payroll'

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Paper P11 option 2 - using the PAYE tables only or with the Pay Adjustment calculator

If you choose this option, you'll need to work out and record the pay and tax information for each pay period in Columns 2 to 8 of the P11 as follows:

Column 2 - pay in the week or month, including any statutory payments like Sick Pay. This is the gross amount (before tax) you've paid your employee.
Column 3 - total pay to date. This is the Column 2 figure plus the Column 3 figure from the previous pay period.
Column 4a - total free pay to date. This is the amount the employee can earn at that point in the tax year before paying tax.
Column 4b - total additional pay to date. Use this instead of Column 4a if the employee has a K tax code.
Column 5 - total taxable pay to date. This is the Column 3 figure minus the Column 4a figure, unless the employee has a K code. If they have, add the Column 3 figure to the Column 4b figure instead.
Column 6 - total tax due to date.
Column 6a and 6b are for K codes only. Enter the tax due for the period in Column 6a. Our helpbook E13 'Day-to-Day Payroll' tells you how to work this out. The regulatory limit is Column 6b.
Column 7 - tax deducted or refunded for the week or month. This is usually the difference between the Column 6 figure for this pay period and the Column 6 figure for the previous pay period.
Column 8 - tax not deducted owing to the regulatory limit. Use this for K codes only.

To work out the total free pay or total additional pay figure for Column 4a or 4b you can use either the Pay Adjustment Tables or the Pay Adjustment calculator (see next section).

To work out the total tax due to date figure for Column 6 you can use the PAYE tax calculator, or either the Calculator Tax Tables or Tables B to D.

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Using the Pay Adjustment calculator to complete Columns 4a/4b

You can use the Pay Adjustment calculator to work out the total free pay to date for Column 4a. If the employee has a K tax code, you can use it to calculate the total additional pay to date for Column 4b. The process is the same in each case - you simply need to enter:

the numeric value of the code (for example, for '525L' enter '525', for 'K164' enter '164' and so on)
the pay interval
whether the code operates on a week 1/month 1 basis
the payment date

The calculator will automatically work out the pay adjustment figure for the week or month.

Using the Pay Adjustment calculator is quick and easy. It means you won't need to use the tables.

Use the HMRC Pay Adjustment Calculator online

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Using the Pay Adjustment Tables to complete Columns 4a/4b

You can work out the figure for Column 4a or 4b manually using the Pay Adjustment Tables A. However, this is less efficient than using the Pay Adjustment calculator.

To use the tables you need to know:

the employee's tax code
the tax week or month number that relates to the payment date

The weekly and monthly charts in helpbook E13 'Day-to-Day Payroll' will help you identify which week or month pay period number you should use.

For all suffix codes and K codes you'll need to use the table for the relevant week or month number, and look up the pay corresponding to the numeric value of the code. You may need to add together entries to arrive at the code number. The tables explain how to do this.

Using the tables with a week 1/month 1 tax code

PAYE tax is normally worked out on a cumulative basis. But you may occasionally need to work it out on a non-cumulative basis, known as a week 1/month 1 basis. If you need to use this method, treat each payment separately and ignore any previous payments made to the employee.

If you use a week 1/month 1 basis, you must always use the right table for week 1 or month 1 when you work out the pay adjustment figure. It doesn't matter what the actual week or month number is when you make the payment.

Once again, using the Pay Adjustment calculator instead is a more efficient option. If you use it, you just need to tell it that the code applies on a week 1/month 1 basis and it will work out the Column 4a or 4b figure for you.

You can read more about week 1/month 1 tax codes in helpbook E13 'Day-to-Day Payroll'.

View the Pay Adjustment Tables (PDF 389K)

Using Taxable Pay Tables to complete Column 6

You can use Taxable Pay Tables to work out the Column 6 entry - total tax due to date. There are two ways of doing this:

using the Calculator Tables
manually, using Tax Tables B to D

Taxable Pay Tables - Calculator Tables method

You can use the Calculator Tables together with your calculator to work out the figure for total tax due to date needed for Column 6. For employees with suffix and K codes, you'll also need to know their total taxable pay to date. The way you work this out depends on their tax code.

For a suffix code, it's the total pay to date minus the free pay at Column 4a.
For a K code, it's the total pay to date plus the additional pay at Column 4b.

Using this figure, just follow the instructions in the Calculator Tables booklet to work out the Column 6 figure.

Separate instructions apply if the employee's tax code operates on a week 1/month 1 basis, or if the employee has a tax code BR or DO.

Calculator Tables – use from 18 May 2008 to 6 September 2008 (PDF 71K)

Calculator Tables – use from 7 September 2008 (PDF 44K)

View the Calculator Tables online

Taxable Pay Tables - manual method

There are alternative tables (Manual Tables) - Tables B to D that you can use to work out the employee's tax due if you prefer not to use a calculator.

Tax Tables B to D – use from 18 May 2008 to 6 September 2008 (PDF 178K)

Tax Tables B to D – use from 7 September 2008 (PDF 52K)

Order the Calculator Tables online

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Practical examples showing you how to Complete columns 2 to 8

There are some practical examples showing you how to complete Columns 2 to 8 of the P11 in our helpbook E13 'Day-to-Day Payroll'. The step-by-step guidance covers several different tax codes and tells you what to do in certain special cases.

Go to helpbook E13 'Day-to-Day Payroll'

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Non-standard pay days or pay intervals and non-cash pay

You may need to follow slightly different procedures when you work out the tax due if:

you don't use a standard pay interval
the pay day's on a non-banking day like a Sunday
you move a pay day

There are also special procedures for dealing with special types of pay like non-cash alternatives.

Find out how to deal with non-standard or moving pay days

Read about special types of pay, including non-cash alternatives

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Benefits of using non-paper methods for the P11

If using paper methods, bear in mind that there are more efficient ways of completing the P11 which will not only save you time but also help you meet important deadlines for filing PAYE online.

These include:

our free P11 calculator on the Employer CD-ROM
commercial payroll software

These will work out the figures for you automatically and make it easier for you to file your return online. From the 2009-10 tax year onwards, it is the intention that all employers must file their Employer Annual Return online (those with 50 or more must do so now). If you have fewer than 50 employees and file online early you'll receive a tax-free payment.

There are also separate deadlines for filing P45s and P46s online. Read more in our related guidance below.

More about employer deadlines for file PAYE online

Read about Using the Employer CD-ROM P11 calculator

Choose a payroll software package