Using Excel to calculate income tax

E

ExcelBeginner34

New Member
Joined
Mar 2, 2019
Messages
41
Office Version
  1. 2016
Platform
  1. Windows
Hi,

I am trying to use Excel to calculate income tax. The tax system has a number of rates applied to each band as follows

Lower Limit (H22) Upper Limited (I22) Rate (J22)
Tax Free Allowance (G23) £0 £12,500 0%
Starter Rate (G24) £12,500 £14,549 19%
Basic Rate (G25) £14,549 £24,999 20%
Intermediate Rate (G26) £24,999 £43,430 21%
Higher Rate (G27) £43,430 £150,000 41%
Top Rate (G28) £150,000 £250,000 46%

So if the Salary was £40,000 before tax:

  • The first £12,500 is tax free
  • The next £2,049 (14,549 - 12,500) is taxed at 19%
  • The next £10,450 (24,999 - 14549) is taxed at 20%
  • and so on until you reach the total salary.

I am trying to calculate each bracket i.e £2,049*0.19 = 389.31 in a separate cell

  • Starter Rate E22
  • Basic Rate E23
  • Intermediate Rate E24
  • Higher Rate E25
  • I don't need the top rate as salary is unlikely to ever go above £150k.

The taxable income i.e gross salary less tax free allowance of £12,500 is currently in cell E20. So for example at £40k this would be £27,500.

I have tried using the IF function but I am just a beginner and not having much luck. Any help would be much appreciated.

Many thanks
 
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Yes - in B5 I now have =VBAProject.Module1.IncomeTax(B1). However, this is providing a figure in B5 of £6,349.41 instead of the £5,629.50 shown on your table in post 6? Not sure what I am doing wrong.
 
Upvote 0

Excel Facts

Quick Sum
Select a range of cells. The total appears in bottom right of Excel screen. Right-click total to add Max, Min, Count, Average.
The 1dd is just the sheet name where I prepared an example.
You can place the table with Brackets and Rates wherever you want.
It is not essential to use named ranges; they can make the formula clearer.
Does the example provide the answer that you require?
What does you tax authority say the tax is for $150,000?
 
Upvote 0
I did not review or edit the UDF that you received above.

I prepared a quick UDF; an expert with VBA can edit and/or enhance it for you.

Code: 
Function IncomeTax2(Amt As Double) As Double
If Amt <= 12500 Then IncomeTax2 = Amt * 0
If Amt > 12500 Then IncomeTax2 = 0 + (0.19 * (Amt - 12500))
If Amt > 14550 Then IncomeTax2 = IncomeTax2 + (0.01 * (Amt - 14550))
If Amt > 25000 Then IncomeTax2 = IncomeTax2 + (0.01 * (Amt - 25000))
If Amt > 43430 Then IncomeTax2 = IncomeTax2 + (0.2 * (Amt - 43430))
If Amt > 150000 Then IncomeTax2 = IncomeTax2 + (0.05 * (Amt - 150000))
End Function
 
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Upvote 0
[TABLE="width: 1286"]
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[TD="colspan: 2"]up to 1000 tax free[/TD]
[TD][/TD]
[TD][/TD]
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[TD="align: right"]1001[/TD]
[TD="align: right"]0.1[/TD]
[TD="align: right"]0[/TD]
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[TD="align: right"]5001[/TD]
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[/TR]
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[TD="colspan: 2"]1001 to 5000 10%[/TD]
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[TD][/TD]
[TD="align: right"]5001[/TD]
[TD="align: right"]0.25[/TD]
[TD="align: right"]400[/TD]
[TD="align: right"]400[/TD]
[TD="align: right"]20001[/TD]
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[TD="colspan: 2"]5001 to 20000 25%[/TD]
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[TD="align: right"]20001[/TD]
[TD="align: right"]0.4[/TD]
[TD="align: right"]3750[/TD]
[TD="align: right"]4150[/TD]
[TD="align: right"]75001[/TD]
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[/TR]
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[TD="colspan: 3"]20001 to 75000 40%[/TD]
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[TD="align: right"]75001[/TD]
[TD="align: right"]0.5[/TD]
[TD="align: right"]22000[/TD]
[TD="align: right"]26150[/TD]
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[/TR]
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[TD="colspan: 2"]75001 upwards 50%[/TD]
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[TD="align: right"]9999999[/TD]
[TD="align: right"]0.5[/TD]
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[TD]row 9[/TD]
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[TD="align: right"]10000[/TD]
[TD="align: right"]1649.75[/TD]
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[TD="colspan: 3"]formula giving 1649.75[/TD]
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[TD="colspan: 8"]=VLOOKUP(I14,mytable,4)+(I14-VLOOKUP(I14,mytable,1))*VLOOKUP(I14,mytable,2)[/TD]
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