# Tax is being deducted when it shouldn’t be.

There are a lot of misconceptions when it comes to paying tax, one query is that tax is being deducted on an employees pay that the user believes is under the tax threshold.

The standard tax code for the year 2020/21 is 1250L which gives a tax-free allowance of £12510.00. But this doesn’t necessarily mean that an employee will not pay tax until they have earned that amount in the year.

The tax code of 1250L standard is a cumulative tax code and will take into consideration what has been paid in the year so far, for example:

Employee 1 has been paid £5500 as a cumulative figure up to and including month 5 and has paid tax of £57.5. Is this correct?

Yes, this is correct. As the tax allowance is £12510.00 for the year, the monthly allowance would be £1042.50 (12510 / 12 = 1042.5).

£1042.50 x 5 (the number of months) = £5212.50 (The allowance up to and including month 5).

Any pay over this would be classed as taxable. As the employee has received £5500 so far and the allowance up to month 5 would be £5212.50 then the amount of taxable pay would be £287.50 (5500 – 5212.50 = 287.50).

20% of 287.50 = £57.50 (the cumulative amount of tax paid so far).

Please bare in mind this is a rough tax calculation and should be used to indicate what tax deduction occur for an employee.

## Software Security Standards Update

Keeping your data safe is of paramount importance to 12Pay. We are always looking for ways to make our technology more secure, whilst delivering reliable and compliant solutions.In the interest of maintaining a high level of data security, 12Pay has recently announced a new security standard for all our products. The security standard is aimed […]