Insurance

I often find myself searching the internet for a tool to help me estimate the cost of employing a new employee. For instance if I decided to pay my future employee a net rate of £7.00 per hour, what would this gross up to once P.A.Y.E. and employees national insurance were added. In addition, what would the total cost to me be once employers national insurance was included. The secret to success was to find a user friendly tax calculator that would give me all the information that I required. An alternative was to create my own tax calculator using excel. If you can create formulae using IF statements then all you require is the following information to piece things together.

First of all, lets us consider P.A.Y.E. The first £6475 is tax free, the next £37400 is usually taxed at 20% with the remaining income up to £150,000 taxed at 40%. Above this, the rate of income tax is 50%.

Employees national insurance is similar with income of £5715 being tax free, the upper earnings limit of £43875 defines the upper limit of the 11% band, with income above this being taxed at 1%.

Employers national insurance is more straight forward, with £5715 being tax free and income above this being taxed at 12.8%.

Now that you know what to do, you just need to create the appropriate formulae using a spreadsheet. It is important to then test your data for accuracy, just to make sure that you've got the formulae right. After that, save the file for future use.