PAYE13090 - Coding: coding: general principles: estimated pay
Estimated pay is required for every employment and occupational pension to enable the system to calculate allowances, deductions and restrictions used to perform a coding calculation. To calculate estimated pay (EstPay) the system will in most cases, use Real Time Information (RTI) supplied on the latest FPS submission. Where the latest FPS information has been used to calculate the estimated pay, the FPS will be shown on the Employment Estimated Earnings screen and can be viewed by selecting the magnifying glass and then the drill down icon. Where the latest FPS cannot be used we will use data already held on the system or default estimated pay values.
How estimated pay is calculated for employments and occupational pensions is based on payment frequency, indicators held on the FPS, whether the source is ceased or live and certain triggers. Details below:
In year estimated pay - employments
Paid regularly
A regular payment is where the pay frequency on the FPS is not 'Paid Irregularly' or 'Paid Annually' i.e. is either weekly, fortnightly, 4 weekly, or monthly.
For a continuous employment - this is an employment that did not start in current tax year (CY)
Where the pay frequency is weekly, fortnightly or 4 weekly EstPay is calculated based on taxable pay to date on the latest FPS divided by the week number and multiplied by 52
Where the pay frequency is monthly EstPay is calculated based on taxable pay to date on the latest FPS divided by the month number and multiplied by 12.
For a mid year start with a start date
Where the pay frequency is weekly, EstPay should be calculated on pay in period x (52 minus the week number on FPS) + pay in period figure.
Where the pay frequency is fortnightly, EstPay should be calculated on pay in period x (52 minus the week number on the FPS, divided by 2) + pay in period figure.
Where the pay frequency is 4weekly, EstPay should be calculated on pay in period x (52 minus the week number on the FPS, divided by 4) + pay in period figure.
When the week number on the FPS is 52 or greater, then the EstPay will be the Pay in Period figure.
Where the pay frequency is monthly, Estpay should be calculated on pay in period x (12 minus the month number on the FPS) + pay in period.
For a mid year start without a start date
Where the pay frequency is weekly, fortnightly or 4 weekly EstPay should be calculated on pay in period x (52 minus week number on FPS) + taxable pay to date
Where the pay frequency is monthly EstPay is calculated based on pay in period multiplied by (12 minus month number on FPS) + taxable pay to date.
Note: In a very small number of cases where there is a mid-year start date and a minus pay in period figure is supplied, this will be used in the same way as above. This will not result in an accurate EstPay figure for the year, so customers may wish to use the TES (Tax Estimate Service) on their PTAs (Personal Tax Accounts) or call the helpline to provide their own amount of EstPay for the year.
Paid quarterly
If the number of days between that payment date and 5/4/CY (end of current tax year) is:-
- 273 days or more – multiply taxable pay to date by 4
- 272-182 days – if on the latest FPS that taxable pay to date equals the pay in period calculate by multiplying taxable pay to date on latest FPS by 3, however if taxable pay to date on the latest FPS is higher than the pay in period calculate by dividing taxable pay to date on latest FPS by 2 and multiplying by 4
- 181-91 days – if on the latest FPS that taxable pay to date equals the pay in period calculate by multiplying taxable pay to date on latest FPS by 2, however if taxable pay to date on the latest FPS is higher than the pay in period calculate by adding together taxable pay to date on latest FPS and pay in period
- 90 days or less – use taxable pay to date on latest FPS.
Paid biannually
If number of days between payment date and 5/4/CY (current tax year)
- 182 days or more - calculate using pay in period times 2
- 181 days or less – use taxable pay to date
Annual or one off payments
Update CY with estimated pay, using the 'taxable pay to date' figure on the FPS.
Paid irregularly
This is where the customer has no recognised regular pay frequency (weekly, fortnightly, 4 weekly, monthly). (Data item 42 on RTI submissions).
- If the Irregular Payment indicator is ticked on the FPS and the pay frequency is irregular we use the taxable pay to date on the latest FPS
- If the Irregular Payment indicator is ticked on the FPS and the pay frequency is not irregular then the normal estimated pay rules apply, either weekly, fortnightly, 4 weekly or monthly
- If the Irregular Payment indicator is not ticked but the pay frequency shows as irregular we will use the taxable pay to date on the latest FPS.
Ceased employments using RTI information
When an individual ceases employment, the estimated pay for CY will be updated to the taxable pay to date shown on the final FPS.
Estimated pay for CY+1 will not be updated.
In ‘P Ceased’ (Potentially Ceased) cases where we do not have an end date shown on NPS, the system will use the 05 April as the leaving date (pending receipt of the final FPS). These cases are treated as leaver cases and estimated pay is calculated using the taxable pay to date figure.
Occupational pension cases where OCPN indicator is ticked
P46 (OCPEN) starter notifications
If the annual pension amount is supplied on the FPS we will pro rata the annual amount for the current year and use this as the EstPay for CY. The pro rata calculation uses the annual pension amount multiplied by the number of days between the start date and 05/04/CY and divided by 365. This resulting figure is then compared with the taxable pay to date on the latest FPS. If the taxable pay to date on the latest FPS is greater than the Pro Rata'd Annual Pension, then the taxable pay to date will be used as EstPay.
The full annual pension amount will be used for CY+1.
Paid regularly
A regular payment is where the pay frequency on the FPS is not 'Paid Irregularly' or 'Paid Annually' i.e. is either weekly, fortnightly, 4 weekly, or monthly.
For a continuous pension - this is a pension which commenced in CY
Where the pay frequency is weekly, EstPay should be calculated on pay in period x (52 minus the week number on FPS) + pay in period figure.
Where the pay frequency is fortnightly, EstPay should be calculated on pay in period x (52 minus the week number on the FPS, divided by 2) + pay in period figure.
Where the pay frequency is 4weekly, EstPay should be calculated on pay in period x (52 minus the week number on the FPS, divided by 4) + pay in period figure.
When the week number on the FPS is 52 or greater, then the EstPay will be the Pay in Period figure.
Where the pay frequency is monthly, Estpay should be calculated on pay in period x (12 minus the month number on the FPS) + pay in period.
Paid quarterly
If the number of days between that payment date and 5/4/CY (end of current tax year) is:-
- 273 days or more – multiply taxable pay to date by 4
- 272-182 days – if on the latest FPS that taxable pay to date equals the pay in period calculate by multiplying taxable pay to date on latest FPS by 3, however if taxable pay to date on the latest FPS is higher than the pay in period calculate by dividing taxable pay to date on latest FPS by 2 and multiplying by 4
- 181-91 days – if on the latest FPS that taxable pay to date equals the pay in period calculate by multiplying taxable pay to date on latest FPS by 2, however if taxable pay to date on the latest FPS is higher than the pay in period calculate by adding together taxable pay to date on latest FPS and pay in period
- 90 days or less – use taxable pay to date on latest FPS
Paid biannually
If number of days between payment date and 5/4/CY (current tax year)
- 182 days or more - calculate using pay in period times 2
- 181 days or less – Use taxable pay to date.
Annual or One Off Payments
Update CY with estimated pay, using the 'taxable pay to date' figure on the FPS.
Paid irregularly
This is where the customer has no recognised regular pay frequency (weekly, fortnightly, 4 weekly, monthly). If the Irregular Payment indicator is ticked on the FPS and the pay frequency is irregular we use the taxable pay to date on the latest FPS.
Employments and Pensions unable to use CY RTI information to calculate estimated pay
CY
Where NPS is unable to calculate estimated pay using Real Time Information (RTI), the system will follow the steps below to calculate estimated pay for a live employment or pension.
- If an FPS has not been received, we use the estimated pay figure from IABD for that employment, including £0.00 amounts
- If there is no estimated pay figure in IABD, use default values of £15,000 for primary and £5,000 for secondary sources
- In paid annually cases, until we receive the annual FPS, we use the estimated pay figure from IABD, including £0.00 amounts. If there is no estimated pay figure in IABD, use default values.
CY+1 Annual coding estimated pay
Calculation of estimated pay for CY+1 at annual coding using RTI information
Estimated pay will be calculated by annualising the 'taxable pay to date' on the latest FPS.
Estimated pay will not automatically be updated where a pension/employment has:
- Estimated pay already held for CY+1
- No FPS held in CY (see below – Employments and Pensions unable to use CY RTI information to calculate estimated pay)
- Ceased or potentially ceased employments, where a live employment exists.
When calculating estimated pay NPS will use the following calculations for each pay frequency: Weekly or Fortnightly x 52. 4 Weekly x 13. Monthly x 12. Quarterly x 4.
For an employment or pension which started in current year (after the 06/04/CY) and the pay frequency is weekly, fortnightly, 4 weekly or monthly or an employment (non pension) which started CY with pay frequency of quarterly
Number of days from Start Date held on the first FPS to the payment date held on the latest FPS divided by 365. The taxable pay to date on the latest FPS is then divided by this result and multiplied by the payment frequency (52, 13, 12 or 4).
Example
Start date on first FPS 26/06/18 and payment date on latest FPS 16/02/19 - number of days = 236
Taxable pay to date on latest FPS 9,807.64. Payment frequency is weekly
236/365 x 52 = 34
9,807.64 / 34 x 52 = 14,999.92. Estimated pay for CY+1 will be £14,999
For an employment or pension which started earlier than current year and the pay frequency is weekly, fortnightly, 4 weekly or monthly paid
Taxable pay to date on latest FPS divided by the week/month number multiplied by payment frequency (52, 12 or 13).
For an employment which started earlier than current year and the pay frequency is quarterly, or any pension that has pay frequency of quarterly
Where the FPS shows the payment frequency as quarterly, the estimated pay for CY+1 will be calculated from the latest FPS as follows;
If payment date is between 06/01/CY & 05/04/CY – Use taxable pay to date on the latest FPS.
If payment date is between 07/10/CY & 05/01/CY - Divide the taxable pay to date by 3 and then multiply by 4.
If payment date is between 08/07/CY & 06/10/CY - Divide the taxable pay to date by 2 and then multiply by 4.
If payment date is between 06/04/CY & 07/07/CY - Multiply taxable pay to date by 4.
For all other Employments/Pensions (irrespective of start date) with the following pay frequencies
Annual paid employment or pension: Where the latest FPS shows the payment frequency as annual, the taxable pay to date on the FPS will be used as the estimated pay for CY+1.
Bi-Annual paid employment/pensions: Where the FPS shows the payment frequency as Bi-Annual, the taxable pay to date on the latest FPS will be multiplied by 2.
Irregular Paid employment/pension: Where the irregular employment indicator is set, the estimated pay for CY+1 will be either the taxable pay to date on the latest FPS or the estimated pay held for CY, whichever is the greater.
One-off payment for employment/pension: Where the FPS shows the payment frequency as One-off payment, the estimated pay for CY+1 will be either the taxable pay to date on the latest FPS or the estimated pay held for CY, whichever is the greater.
Employments and pensions unable to use CY RTI information to calculate estimated pay for annual coding
Estimated pay for a live employment or pension will be calculated in the following order of priority
1. Estimated pay figure set against a live employment/pension in IABD for CY+1.
2. Estimated pay figure set against a live employment/pension in IABD for CY.
3. CY-1 P14 figure for that linked employment or pension (uplifted by 2.5% for employments and 5.06% for pensions).
4. CY-2 P14 figure for that linked employment or pension (uplifted by 2.5% for employments and 10.31% for pensions).
5. If none of the above present then default values of £15,000 for primary and £5,000 for secondary sources.
Note: The end of year record (P14) is not linked until it is viewable on the Employment Summary screen.
Where the relevant employment started after the beginning of the CY-1 (or CY-2, if the rules take the calculation that far back) the part year figure will be annualised.
The annualised amount is calculated as follows:
Determine the number of weeks from the start date of the employment held on the Employment Details screen to the end of the tax year;
And then
Dividing the end of year record (P14) pay figure by the number of weeks to which it relates up to 52 weeks;
And then
Multiplying the weekly pay figure received by 52 weeks to calculate the estimated annual amount.
Example
Employment starts on 28th October and the individual has received £2,500 over this period. Between 28th October and 6th April the following year is 23 weeks.
The annualised estimated pay is £2,500 / 23 x 52 = £5,652 (rounded down to nearest pound).
Note: An end date will not be used when calculating the total number of days. Days will always be calculated from the start date to the end of the tax year.
PAYE online service estimated pay calculation
Where the individual has already provided us with an estimated pay figure via the PAYE online service or a telephone call we will not overwrite the Estimate Pay figure unless the taxable pay to date on the latest FPS exceeds the estimated pay supplied by the customer.
Where the PAYE online service has been used to update estimated pay the following information will be shown in Contact History.
Date of contact e.g. 06/07/2016
Contactor type will be 'PAYE ONLINE'
Contact channel is 'INTERNET IN'
Contact direction is 'INBOUND'
Document type is 'PAYE ONLINE'
Where the user updates their income online, the ‘Actions field’ will show the following note:
"An Internet update to New estimated pay has occurred within IABD to the following Employment record: <Retrieve the Employment Reference for the employment>"
The PAYE online service will not calculate and update estimated pay for CY+1.
Manually calculate estimated pay
Where you need to manually calculate estimated pay, you should consider the following points:
- Use any estimate provided by the individual. This will need to be recorded as
- TELEPHONE
- LETTER
- AGENT
The estimated pay is then recorded as provided by the customer and will be accepted in any In Year Calculation, unless the Taxable Pay to date figure on the latest FPS is greater than this figure. If the Taxable pay to date is more then we will use this figure as estimated pay.
- If no figure has been provided by the individual and no in year FPSs are held, you should use the figure held in IABD. If no figure is held in IABD, use the default amount, £15,000 for a primary source and £5,000 for a secondary source
- In pension cases, if the Annual Pension figure is shown and the pension commenced in CY you should apportion the annual figure by using the annual pension amount multiplied by the number of days between the start date and 05/04/CY and divided by 365. This should then be used to update IABD with the estimated pay for that source. Remember to include the whole annual pension amount as estimated pay for CY+1.
Note: When estimated pay is reviewed for pensions you should check if the pension is paid as a static amount and will not require an increase for estimated pay. Review previous end year record (P14) pay information and Contact History to see if the amount should be increased.