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2. Guidance Notes for Teachers Some indication of content and range at level 1 and 2 is shown on the next slide. Relevant slides show all the diagrams/questions/answers that are required. End slides have student question sheets and a teacher question/answer sheet. End slides have printable worksheets for students. Calculator symbols are suggestions only and could be removed depending on the group. The vast majority of questions in this presentation are designed to be non- calculator. You might want to point students in the direction of http://listentotaxman.com/ to check the results afterwards http://listentotaxman.com/ Generic Advice: The preparation below is advisable in the majority of presentations. 1.Print off the teacher question and answer sheets/worksheets 2.Print off the student question sheets/worksheets 3.Run through the presentation yourself answering the questions 4.Decide how you are going to deliver the presentation. (a) Are you going to go through it from start to finish with the class, perhaps using it as an example/demonstration of functional maths and focusing on the development of the processing skills involved at each stage? (b) Are you going to use only part of the presentation? (c) Are you simply going to use the presentation to introduce the activity and let the class work on their own through the question sheets but refer to some of the elements/answers within the presentation when needed? 5.Remember the slides are editable so if you wish to introduce an open question/small investigation of your own then simply choose the relevant slide add/delete your own text (using a text box if needed).

3. Content and Skills Coverage and range: Level 1 Understand and use whole numbers and recognise negative numbers in practical contexts Add, subtract, multiply and divide using a range of mental methods Multiply and divide whole numbers by 10 and 100 using mental arithmetic Understand and use equivalences between common fractions, decimals and percentages Add and subtract decimal up to two decimal places Solve simple problems involving ratio, where one number is a multiple of the other Use simple formulae expressed in words for one- or two-step operations Solve problems requiring calculation with common measures including money, time, length, weight, capacity and temperature Convert units of measure in the same system Work out areas, perimeters and volumes in practical situations Construct models and draw shapes, measuring and drawing angles and identifying line symmetry Extract and interpret information from tables, diagrams, charts and graphs Collect and record discrete data and organise and represent information in different ways Find mean and range Use probability to show that some events are more likely to occur than others Understand outcomes, check calculations and explain results Understand and use positive and negative numbers of any size in practical contexts Carry out calculations with numbers of any size in practical contexts Understand, use and calculate ratio and proportion, including problems involving scale Understand and use equivalences between fractions, decimals and percentages Add and subtract fractions; add, subtract, multiply and divide decimals to a given number of decimal places Understand and use simple equations and simple formulae involving one- or two-step operations Recognise and use 2D representations of 3D objects. Find area, perimeter and volume of common shapes Use, convert and calculate using metric and, where appropriate, imperial measures Collect and represent discrete and continuous data, using ICT where appropriate Use and interpret statistical measures, tables and diagrams, for discrete and continuous data using ICT where appropriate Use statistical methods to investigate situations Use a numerical scale from 0 to 1 to express and compare probabilities Title: Pay, tax and National Insurance Content and skills covered Coverage and range: Level 2 At least 1 from each area

4. What mathematics might be involved in calculating Pay, Tax and National Insurance?

5. Intro Direct Taxation (PAYE) Direct taxation is the tax that is deducted from a worker’s (employee’s) wage or salary (Income). This money is deducted by the employer and is sent to the HM Revenue & Customs each week or month. This method of paying tax is called PAYE (Pay As You Earn). It saves you having to work out your tax bill yourself and paying it all in one go at the end the financial year (as happens in some countries). When an employee receives their pay slip they can see how much tax has been taken. What they have left to keep for themselves is their NET PAY or take-home pay. NET PAY = GROSS PAY – 1 Income Tax – 2 National Insurance Contribution Income Tax varies, depending on how much a person earns. This tax is used to pay for things such as Government Departments, the National Health Service, police, prisons, schools and the armed services. National Insurance Contributions (NIC’s) are a form of income tax and they are used to cover the costs of pensions and sick pay amongst other things.

6. Stuart and Julia NET PAY = GROSS PAY – 1 Income Tax – 2 National Insurance Contribution As an example consider Stuart who works as a fitter for Cobalt Engineering, a small engineering company employing 85 people. His weekly gross pay is £400. Gross Pay = £400.00 1 Income tax - £55.10 2 NIC - £31.90 After deductions his net pay is £313.00 Net Pay £313.00 As a second example consider Julia who works as a production manager for Cobalt Engineering. She receives a salary of £36 000 (per annum) and so is paid monthly. Her monthly gross pay is £3000. Gross Pay = £3000.00 1 Income tax - £492.08 2 NIC - £277.55 After deductions her net pay is £2230.37 Net Pay £2230.37 Graphics © bigstockphoto.com Direct Taxation (PAYE)

7. NET PAY = GROSS PAY – 1 Income Tax – 2 National Insurance Contribution Not all of a persons income is taxed. Everyone has a personal tax allowance. This is the amount of money that can be earned before any tax is paid. Any earnings above this amount is regarded as taxable income. Calculating Tax Personal Allowance£6475 Basic rate tax: 20%Up to £37 400 Higher rate tax: 40%Over £37 400 Tax Rates 2009 - 2010 2 Upper Earnings Limit£844/week 1 Primary Threshold£110/week Rate between 1 and 211% NIC’s 2009 - 2010 NIC’s are calculated using weekly rates of pay and part of the table for 2009 – 2010 is shown. Tax Rates

8. Example 1 NET PAY = GROSS PAY – 1 Income Tax – 2 National Insurance Contribution Calculating Tax Personal Allowance£6475 Basic rate tax: 20%Up to £37 400 Higher rate tax: 40%Over £37 400 Tax Rates 2009 - 2010 2 Upper Earnings Limit£844/week 1 Primary Threshold£110/week Rate between 1 and 2 11% NIC’s 2009 - 2010 Gross Pay = £400.00 1 Income tax - £55.10 2 NIC - £31.90 Net Pay £313.00 We will use both tables above to show the calculations for Stuart’s pay. Gross annual income = £400 x 52 = £20 800 Taxable income = £20 800 - £6475 = £14 325 Tax paid = 20% of £14 325 = £2865 Weekly tax paid = £2865  52 = £55.10 NIC = 11% of (£400 - £110) = £31.90 Net weekly pay = £400 - £87.00 = £313.00 Graphic © bigstockphoto.com

9. Example 2 NET PAY = GROSS PAY – 1 Income Tax – 2 National Insurance Contribution Calculating Tax Personal Allowance£6475 Basic rate tax: 20%Up to £37 400 Higher rate tax: 40%Over £37 400 Tax Rates 2009 - 2010 2 Upper Earnings Limit£844/week 1 Primary Threshold£110/week Rate between 1 and 2 11% NIC’s 2009 - 2010 Similarly, checking Julia’s pay and deductions. Gross annual income = £3000 x 12 = £36 000 Taxable income = £36 000 - £6475 = £29 525 Tax paid = 20% of £29 525 = £5905 Monthly tax paid = £5905  12 = £492.08 NIC = 11% of (£692.31 - £110) = £64.05 Net monthly pay = £3000 - £769.63 = £2230.37 Gross Pay = £3000.00 1 Income tax - £492.08 2 NIC - £277.55 Net Pay £2230.37 Weekly earnings = £36 000  52 = £692.31 Monthly NIC = £64.05 x 52  12 = £277.55 Graphic © bigstockphoto.com

10. Question 1 (3 parts) NET PAY = GROSS PAY – 1 Income Tax – 2 National Insurance Contribution Calculating Tax Personal Allowance£6475 Basic rate tax: 20%Up to £37 400 Higher rate tax: 40%Over £37 400 Tax Rates 2009 - 2010 2 Upper Earnings Limit£844/week 1 Primary Threshold£110/week Rate between 1 and 2 11% NIC’s 2009 - 2010 Q1. Calculate the net weekly/monthly pay and deductions for the three employee’s of Cobalt Engineering given below. NamePosition Weekly Gross Pay Monthly Gross Pay Salary Robert SmithAdmin Officer£320.00-- Jenny MilesAnalyst-£2200- James GilbyAccountant--£42 000

11. Answer 1 NET PAY = GROSS PAY – 1 Income Tax – 2 National Insurance Contribution Calculating Tax Personal Allowance£6475 Basic rate tax: 20%Up to £37 400 Higher rate tax: 40%Over £37 400 Tax Rates 2009 - 2010 2 Upper Earnings Limit£844/week 1 Primary Threshold£110/week Rate between 1 and 2 11% NIC’s 2009 - 2010 1. Calculations for Robert: Gross annual income = £320 x 52 = £16 640 Taxable income = £16 640 - £6475 = £10 165 Tax paid = 20% of £10 165 = £2033 Weekly tax paid = £2033  52 = £39.10 NIC = 11% of (£320 - £110) = £23.10 Net weekly pay = £320 - £62.20 = £257.80

12. Answer 2 NET PAY = GROSS PAY – 1 Income Tax – 2 National Insurance Contribution Calculating Tax Personal Allowance£6475 Basic rate tax: 20%Up to £37 400 Higher rate tax: 40%Over £37 400 Tax Rates 2009 - 2010 2 Upper Earnings Limit£844/week 1 Primary Threshold£110/week Rate between 1 and 2 11% NIC’s 2009 - 2010 Gross annual income = £2200 x 12 = £26 400 Taxable income = £26 400 - £6475 = £19 925 Tax paid = 20% of £19 925 = £3985 Monthly tax paid = £3985  12 = £332.08 NIC = 11% of (£507.69 - £110) = £43.75 Net monthly pay = £2200 - £521.66 = £1678.34 Weekly earnings = £26 400  52 = £507.69 2. Calculations for Jenny: Monthly NIC = £43.75 x 52  12 = £189.58

13. Answer 3 NET PAY = GROSS PAY – 1 Income Tax – 2 National Insurance Contribution Calculating Tax Personal Allowance£6475 Basic rate tax: 20%Up to £37 400 Higher rate tax: 40%Over £37 400 Tax Rates 2009 - 2010 2 Upper Earnings Limit£844/week 1 Primary Threshold£110/week Rate between 1 and 2 11% NIC’s 2009 - 2010 Gross annual income = £42 000 Taxable income = £42 000 - £6475 = £35 525 Tax paid = 20% of £35 525 = £7105 Monthly tax paid = £7105  12 = £592.08 NIC = 11% of (£807.69 - £110) = £76.75 Net monthly pay = £42 000  12 - £924.66 = £2575.34 Weekly earnings = £42 000  52 = £807.69 3. Calculations for James: Monthly NIC = £76.75 x 52  12 = £332.58

14. Example 3 NET PAY = GROSS PAY – 1 Income Tax – 2 National Insurance Contribution Calculating Tax Personal Allowance£6475 Basic rate tax: 20%Up to £37 400 Higher rate tax: 40%Over £37 400 Tax Rates 2009 - 2010 2 Upper Earnings Limit£844/week 1 Primary Threshold£110/week Rate between 1 and 2 11% NIC’s 2009 - 2010 For all earnings above the upper earnings limit, a 1% rate NIC rate is payable. Calculating net pay and deductions for Clive gives: Taxable income = £60 000 - £6475 = £53 525 Tax paid = 20% of £37 400 + 40% of (£53 525 - £37 400) = £13 930 Monthly tax paid = £13 930  12 = £1160.83 NIC = 11% of (£844 - £110) + 1% of (£1153.85 – £844) = £83.84 Net monthly pay = £60 000  12 - £1524.14 = £3475.86 Weekly earnings = £60 000  52 = £1153.85 Clive Smith Position: Senior Manager Salary £60 000 Rate above 2 1% Monthly NIC = £83.84 x 52  12 = £363.31 Graphic © bigstockphoto.com

15. Question and Answer 2 NET PAY = GROSS PAY – 1 Income Tax – 2 National Insurance Contribution Calculating Tax Personal Allowance£6475 Basic rate tax: 20%Up to £37 400 Higher rate tax: 40%Over £37 400 Tax Rates 2009 - 2010 2 Upper Earnings Limit£844/week 1 Primary Threshold£110/week Rate between 1 and 2 11% NIC’s 2009 - 2010 Q 2. Calculate the net pay and tax deductions for Bill Johnson, the Managing Director of Cobalt Engineering. Bill Johnson Position: Managing Director Salary £100 000 Rate above 2 1% Taxable income = £100 000 - £6475 = £93 525 Tax paid = 20% of £37 400 + 40% of (£93 525 - £37 400) = £29 930 Monthly tax paid = £29 930  12 = £2494.17 NIC = 11% of (£844 - £110) + 1% of (£1923.08 – £844) = £91.53 Net monthly pay = £100 000  12 - £2890.80 = £5442.53 Weekly earnings = £100 000  52 = £1923.08 Monthly NIC = £91.53 x 52  12 = £396.63 Graphic © bigstockphoto.com

16. Teacher Q and A (1) 1(a) Calculations for Robert: Gross annual income = £320 x 52 = £16 640 Taxable income = £16 640 - £6475 = £10 165 Tax paid = 20% of £10 165 = £2033 Weekly tax paid = £2033  52 = £39.10 NIC = 11% of (£320 - £110) = £23.10 Net weekly pay = £320 - £62.20 = £257.80 Gross annual income = £2200 x 12 = £26 400 Taxable income = £26 400 - £6475 = £19 925 Tax paid = 20% of £19 925 = £3985 Monthly tax paid = £3985  12 = £332.08 NIC = 11% of (£507.69 - £110) = £43.75 Net monthly pay = £2200 - £521.66 = £1678.34 Weekly earnings = £26 400  52 = £507.69 1 (b) Calculations for Jenny: Monthly NIC = £43.75 x 52  12 = £189.58 Gross annual income = £42 000 Taxable income = £42 000 - £6475 = £35 525 Tax paid = 20% of £35 525 = £7105 Monthly tax paid = £7105  12 = £592.08 NIC = 11% of (£807.69 - £110) = £76.75 Net monthly pay = £42 000  12 - £924.66 = £2575.34 Weekly earnings = £42 000  52 = £807.69 1 (c) Calculations for James: Monthly NIC = £76.75 x 52  12 = £332.58 NamePosition Weekly Gross Pay Monthly Gross Pay Salary Robert SmithAdmin Officer£320.00-- Jenny MilesAnalyst-£2200- James GilbyAccountant--£42 000 Q1. Calculate the net weekly/monthly pay and deductions for the three employee’s of Cobalt Engineering given below. Teacher Q and A (1)

17. Personal Allowance£6475 Basic rate tax: 20%Up to £37 400 Higher rate tax: 40%Over £37 400 Tax Rates 2009 - 2010 2 Upper Earnings Limit£844/week 1 Primary Threshold£110/week Rate between 1 and 2 11% NIC’s 2009 - 2010 Q 2. Calculate the net pay and tax deductions for Bill Johnson, the Managing Director of Cobalt Engineering. Rate above 2 1% Bill Johnson Position: Managing Director Salary £100 000 Taxable income = £100 000 - £6475 = £93 525 Tax paid = 20% of £37 400 + 40% of (£93 525 - £37 400) = £29 930 Monthly tax paid = £29 930  12 = £2494.17 NIC = 11% of (£844 - £110) + 1% of (£1923.08 – £844) = £91.53 Net monthly pay = £100 000  12 - £2890.80 = £5442.53 Weekly earnings = £100 000  52 = £1923.08 Monthly NIC = £91.53 x 52  12 = £396.63 Teacher Q and A (2)

18. Student Q1 + Worksheet Personal Allowance£6475 Basic rate tax: 20%Up to £37 400 Higher rate tax: 40%Over £37 400 Tax Rates 2009 - 2010 2 Upper Earnings Limit£844/week 1 Primary Threshold£110/week Rate between 1 and 2 11% NIC’s 2009 - 2010 Q1. Calculate the net weekly/monthly pay and deductions for the three employee’s of Cobalt Engineering given below. NamePosition Weekly Gross Pay Monthly Gross Pay Salary Robert SmithAdmin Officer£320.00-- Jenny MilesAnalyst-£2200- James GilbyAccountant--£42 000 Student Question 1

19. Personal Allowance£6475 Basic rate tax: 20%Up to £37 400 Higher rate tax: 40%Over £37 400 Tax Rates 2009 - 2010 2 Upper Earnings Limit£844/week 1 Primary Threshold£110/week Rate between 1 and 2 11% NIC’s 2009 - 2010 For all earnings above the upper earnings limit, a 1% rate NIC rate is payable. Calculating net pay and deductions for Clive gives: Rate above 2 1% Q 2. Calculate the net pay and tax deductions for Bill Johnson, the Managing Director of Cobalt Engineering. Bill Johnson Position: Managing Director Salary £100 000 Student Question 2