Tax and NI Calculation

• Why are the directors on my payroll not paying any NI?

  There are two different methods for calculating NI. Manual tables, or the exact percentage method. 12Pay follows the HMRC recommendation for payroll software and uses the "exact percentage method". You can validate 12Pay's answers at this HMRC web page: http://nicecalculator.hmrc.gov.uk/Class1NICs1.aspx
  
  Please note also that directors have NI calculated against annual limits using their cumulative pay

• Why does 12Pay calculate a different NI deduction compared with Sage?

  There are two different methods for calculating NI. 12Pay follows the HMRC recommendation for payroll software and uses the exact percentage method. You can validate 12Pay's answers at this HMRC web page: http://nicecalculator.hmrc.gov.uk/Class1NICs1.aspx

• Why are my tax calculations wrong?

  If you don't agree with the results the software is producing, check the following are correct:
  Tax code
  Week 1/ month 1 indicator
  Pay and tax with previous employers on their P45
  Previous taxable pay and tax in this employment
  Taxable pay this period
  The current period-end date
  The type of payroll (weekly/monthly/2 weekly/4 weekly)
  
  If you still don't agree with 12Pay's calculations, check the calculation on the following website:
  http://payecalculator.hmrc.gov.uk/PAYE0.aspx
  
  If after that you still don't understand where the problem lies please contact us with the full details, as outlined in the bulleted list above

• How do I pay expenses such as travel or mileage, which aren't taxable or subject to NI?

  You can create any number of your own payment or deduction codes for this kind of requirement using the Expenses screen to pay mileage @35p/mile.
  
  
  
  
  
  Taxable, NI-able, and Pensionable are not ticked, Standard payment and Variable payment are ticked. This allows the payment/deduction code to be applied either on the employee's Pay tab as a regular payment, or on the employee's This Period tab as a one off.
  
  To pay miles at 35p a mile enter the number of miles in the Units box on the employee Payment tab when making a payment, or leave the units blank and just enter a value in the Pay box when making the payment.
  
  In this instance we've also ticked the Hours/Rate/Pay box on the Advanced tab. This means Units and Rate will be shown on the payslips as well as the actual calculated payment.

• Why are my NI calculations wrong?

  You may have ticked the Directors NI box, or omitted to tick it when it should be ticked. The rules for calculating Directors' NI are different to the rules for calculating regular employees' NI. http://www.hmrc.gov.uk/nitables/ca44.pdf

• Why are the directors on my payroll not paying any NI?

  Directors' NI is calculated on total annual salary using annual NI limits. Any NI previously paid is subtracted to arrive at the current NI deduction. Until a director's cumulative pay in the tax year has exceeded the annual NI earnings threshold they will not pay any NI.
  
  For regular employees each pay period is treated in isolation, meaning they will tend to pay similar amounts of NI each period as long as their earnings remain steady.

• Why are so many of my employees getting a tax refund?

  If you accidentally skip a pay period, employees may get tax refunds in the following period. Check the employee PAYE tabs to ensure that they have a complete payment history for the current tax year. Having payslips from a past period does not mean you completed that period correctly. For example you may have pressed the Restart Period button which puts the payroll back into its initial state for the period.