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

Select a hidden cell
Somehide hide payroll data in column G? Press F5. Type G1. Enter. Look in formula bar while you arrow down through G.
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]
[TD="align: right"]0[/TD]
[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="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]
[TD][/TD]
[TD][/TD]
[TD][/TD]
[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="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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