Instructions

Calculating Income Tax

1

Collect Form P45 from each employer that you have worked for during the tax year in question (assuming you are not self-employed). This form will tell you how much tax has already been deducted from your paychecks.
2

Determine your taxable income for the tax year in question. This includes all income from employment, self-employment, pensions, stock market investments and rental and trust income. Don't forget to include non-cash company benefits such as a company car.
3

Subtract your Personal Allowance from your taxable income. For those under 65 in the tax year 2010-2011, the amount is 6,475 pounds. The formula is more complicated for those 65 and older.
4

Subtract other tax-free allowances such as the Blind Person's allowance and business expenses. The result is your adjusted taxable income.
5

Multiply your adjusted taxable income by the percentage set forth in the Tax Rate Schedule to arrive at your total tax.
6

Subtract from your total tax the amounts deducted from your paycheck as listed on your Form P45 (or any periodic payments already made if you are self-employed) along with any previous overpayments. This the amount of income tax you owe.

Calculating National Insurance Contributions

1

Determine if you are an employee or self-employed for National Insurance purposes. For example, you are self-employed if you have no boss, run your own business and hire people at your own expense. You are an employee if you have a boss and are paid by the hour.
2

If you are employed and make between 97 and 844 pounds a week, calculate 11 percent of your income. Add 1 percent for any amount over 844 pounds per week. This is your National Insurance contribution for the 2010-2010 tax year. If you earn less than 97 pounds per week, your contribution is zero. If you are a member of a pension plan at work, consult with your employer about possible reductions.
3

If you are self-employed and make between 5,715 and 43,875 pounds per year taxable profit, figure 2.40 per week plus 8 percent of taxable profits. Add 1 percent of taxable profits on any amount over 43,875. This is your National Insurance Contribution for the 2010-2011 tax year. A Small Earnings Exception applies to those with earnings of less than 5,075 pounds per year. Be sure not to confuse earnings with taxable profits when figuring.