How we calculate

Last updated: 6 November 2026

Accuracy is the whole point of a calculator, so this page sets out exactly how PayCalc UK works out its figures: where the numbers come from, the tax year we use, the formulas behind each tool, the assumptions we make, and how to tell us if something looks wrong.

Where our figures come from

Where a calculator uses a UK rate, threshold or allowance, we take it from official sources such as GOV.UK, HMRC and DWP — we don't invent or estimate them. For borrowing, mortgages and general money questions we use standard financial formulas and trusted public guidance such as MoneyHelper. Our primary references are:

Each calculator also lists its specific sources in a “Sources” box beneath the results, so you can check the official figures yourself.

The tax year we use

Unless a tool lets you pick a year, calculations use the 2026/27 UK tax year (6 April 2026 to 5 April 2027). We review the figures when HMRC and DWP confirm new rates — typically after the Autumn Budget and again before the new tax year in April — and update the “last updated” date on each page when we do.

Recent corrections

When we find a mistake in a calculation we fix it and say so here, so you can tell whether a figure you saw before has changed.

  • 6 November 2026 — Electricity VAT extension status. Clarified the VAT guide and calculator guidance: the current temporary 0% rate for qualifying domestic electricity in Great Britain runs from 1 October 2026 to 31 March 2027. The announced extension from 1 April to 30 June 2027 remains subject to implementing legislation. Northern Ireland electricity and UK domestic gas remain at 5%. The calculator's formulas have not changed.
  • 4 November 2026 — Household energy VAT. Corrected the VAT guide's examples for household energy. The temporary 0% rate applies to qualifying electricity supplies in Great Britain. Domestic gas remains at 5% across the UK, and qualifying domestic electricity in Northern Ireland currently remains at 5%. The calculator's formulas have not changed.
  • 1 October 2026 — Savings calculator. With interest added monthly, we added a twelfth of the rate each month, which treats the rate as a gross rate rather than the AER banks advertise. The AER already includes compounding, so a lump sum now earns exactly the AER in a year: £20,000 at 4.5% earns £900, not £918.80. Projections with monthly interest are a little lower; £500 a month for 20 years at 4.5% comes to £192,079.90, not £194,062.18. With interest added once a year, nothing changes.
  • 29 September 2026 — Student loan on fortnightly and 4-weekly pay (take-home pay and bonus tax calculators). We worked out a fortnight's or four weeks' repayment on the whole period's pay. HMRC works it out on the average week's pay, rounded down to whole pounds, and multiplies that back, so the repayment can be up to £1 lower a fortnight and up to £3 lower every four weeks. Weekly and monthly repayments now also use HMRC's published thresholds, which are cut to the penny; that changes a repayment by £1 only in rare cases.
  • 29 September 2026 — Take-home pay calculator, including its Scottish, Marriage Allowance and Child Benefit versions. With a salary sacrifice pension, we worked out student loan repayments on your full salary. They are worked out on the same pay as National Insurance, which salary sacrifice lowers. On £35,000 with a 5% salary sacrifice pension on Plan 2 in 2026/27, the repayment is £347.85 a year, not £505.35, so take-home pay is £157.50 a year higher. Net pay and relief at source pensions are unchanged.
  • 27 September 2026 — Loan, loan early repayment, car finance and hire purchase calculators. We divided the APR by 12 to get the monthly interest rate. The APR already includes compounding, so that overstated payments slightly. On £18,000 over 48 months at 9.9% APR, the monthly payment is £452.02, not £455.66, and the interest over the term is £3,697, not £3,872. Figures on these calculators are now a little lower.
  • 20 September 2026 — Better off in work calculator. Corrected household totals to include your partner's take-home pay. Saved couple scenarios may now show higher totals. Your estimated Universal Credit and the difference between your current and new situations are unchanged.

How each calculator works

Income tax & take-home pay

We apply your personal allowance (tapered away by £1 for every £2 of income over £100,000), then the basic, higher and additional rate bands — or the Scottish bands if you select Scotland. National Insurance is calculated separately on earnings above the primary threshold. Pension contributions, salary sacrifice and student loan repayments (Plans 1, 2, 4 and 5) are applied in the correct order before arriving at net pay. Postgraduate Loan repayments aren't included in the take-home calculator yet.

Self-employment & dividends

Sole-trader profit is taxed using the income tax bands plus Class 4 National Insurance, with an estimate for payments on account. Dividends use the £500 dividend allowance and the dividend rates, stacked on top of your other income.

Capital Gains, crypto & VAT

Capital Gains Tax applies the £3,000 annual exempt amount and the 18%/24% rates, with crypto treated as a chargeable asset (each disposal pooled per HMRC rules). VAT is a straightforward add/remove at the rate you choose.

Mortgages, loans & borrowing

Mortgages and personal loans use the standard amortisation formula — a fixed monthly payment that clears the balance over the term, with interest charged on the reducing balance. The credit card tool simulates the balance month by month (including the shrinking minimum payment); car finance models PCP and HP including the balloon/GMFV; and the balance transfer tool compares paying off a 0% card, net of its fee, against staying put.

Loan and car-finance figures turn the APR you enter into the monthly rate that compounds to it over a year: the twelfth root of (1 + APR), minus one. The APR already includes compounding, so dividing it by 12 would overstate every payment. It is also a legal measure of the total cost of credit and can fold in compulsory fees, so a lender's actual repayment schedule may differ slightly from this estimate where fees are included or the agreement uses a different interest calculation.

Savings, pensions & Universal Credit

Savings use compound interest on your starting balance and regular deposits. The pension tool projects a pot from contributions, employer top-ups and assumed growth. Universal Credit applies the standard allowance, work allowance and the 55% taper, plus the Minimum Income Floor for the self-employed where relevant.

Universal Credit estimates cover the single monthly assessment period described by the figures you enter. They don't know your history: the self-employed tool sets any unused losses you enter against the month's profit before the Minimum Income Floor check, as DWP does, but it doesn't track losses or surplus earnings from month to month for you. A loss in the month you enter counts as £0 earnings and is carried forward.

Our assumptions & limits

Calculators are illustrations, not personal forecasts. Unless you tell them otherwise they assume a single employment, a constant interest or growth rate over the period, and standard circumstances. Real life varies — rates change, deals have fees, and your own tax code or benefit situation may differ. Where a figure is an estimate or simplification, we say so on the page.

How we check the numbers

Our formulas are unit-tested against worked examples, and we cross-check results against official government calculators where one exists (for example HMRC's tax and stamp duty tools). When the rules change, we update the figures and re-run those checks.

Found an error? Tell us

We'd genuinely rather hear about a mistake than not — accuracy is what makes a calculator worth using. If a figure looks off, please contact us with the inputs you used and we'll investigate and correct it.

Not financial advice

PayCalc UK provides information and illustrative calculations only. We are not financial advisers, accountants or brokers, and nothing here is personal advice. For decisions about your money, speak to an appropriately qualified professional. See our disclaimer for full details.

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