ABSTRACT
This appendix is an extract of the spreadsheet program used to generate the table showing average and marginal rates of tax at different levels of income. It makes considerable use of ‘IF Statements’ to automatically take into account the different rates of NIC at different levels of earnings (earnings are in cell C4). Let me explain the formula in cell D4. This says that if earnings (ie C4) are less than £54 per week, then NIC is nil; it then says if earnings are greater than £54 per week but less than £405, then the NIC is 9% of the earnings over £54 plus 2% of the first £54; if earnings are greater than £405 (the upper earnings limit) the NIC is £32.67. Cell E4 calculates personal income tax. If earnings (ie cell C4) are less than £66.25 (the weekly amount of the personal allowance), tax is nil; then if earnings are less than £104.71 (the weekly amount of the personal allowance plus reduced rate band), the tax is 20% of the earnings in the reduced rate band; the next part of the IF Statement deals with the basic rate taxpayer. Cell B4 calculates the employers NIC which is based on earnings. This is added to the earnings figure to give the total cost to the employer of that employee, this is called the payroll cost. Both employers and employees NIC are a form of payroll tax, complicated and with unfair marginal rates.
