Tax Calculations and Tax Deductions

Tax deduction is calculated through the deduction group Taxes. Calculations are initiated through the element Tax and NI.

The deduction is based on the person’s earnings for tax purposes. This is calculated and held in the balance ‘Taxable Pay’. There are also balances for Post P45 taxable pay and Share Related Taxable Pay.

Note: These bands and values vary over time and with budget or other government announcements; Fusion applications will update the values to be consistent with the legislation.

Some allowances are given to employees, to exempt some of their earnings from tax, for example a personal allowance. This is converted to a tax code by HMRC and is stored in the PAYE component as the Tax Code on the Statutory Deductions calculation card.

An employment can be taxed either on a cumulative basis, or a non-cumulative basis.

• A cumulative basis means that tax is calculated considering the whole tax year’s earnings, personal allowance and payments made to date in the tax year.
• A non-cumulative basis is also referred to as a Week 1 or Month 1 basis. This means that the tax is calculated as if it were the first period in the tax year but based on the earnings for this pay period.

Tax Deductions

The Tax deduction is calculated through the deduction group Taxes. Calculations are initiated through the element Tax and NI. To view details on deduction groups, deductions, and elements:

1. Navigate to Component Group Rules.
2. Choose Taxes.
3. Expand Related Elements > PAYE > Calculation Factors.
4. You can review the values effective as of 06 April of that tax year.