Incorrect Tax Calculations

If you feel that CollSoft Payroll has calculated the incorrect amount of tax then you should try the following:

Check the employee Cut off point/Tax Credit

Each employee has a weekly (and monthly) cut off point. All pay under the cut off point is taxed at the standard rate of 20%, while all pay above it is taxed at the higher rate of 40%. If you leave the employee cut off point at zero then all his/her pay is taxed at 40%. Please ensure that you have entered the tax credit and cut off points in the correct boxes and not vice versa.

Check the employee’s P45 details

If this employee has started employment with you in the current tax year then check to see that you have entered the correct details from his/her P45 (which can be found in the Revenue section of their file). If the employee is taxed on the standard cumulative basis then these figures are factored into the tax calculations, and hence any mistakes in their entry will cause the tax calculations to be wrong.

It is important that you do not enter an employee’s previous employment details into the YTD section of their file (by setting the Starting YTD Figures) as this amounts to a double entry of the data and the amounts that you enter will be taken into consideration in your P30’s and P35.

Finally, check the date that the P45 was issued. If it was issued before 1st January then it belongs to the previous tax year and you should not enter it into CollSoft Payroll.

We have found that many Forms P45 issued by previous employers, often allocate an additional week or two weeks tax credit when employment ceases. This may be due to the fact that the employee is receiving holiday pay due at the time of cessation. However, if the employee commences work with your firm immediately, you may find that the employee’s wage is deducting a large amount of tax. This is because their tax has been underpaid at cessation of the last employment.

Check the employee’s taxation basis

Most employees are taxed on a cumulative basis where all pay (including previous employments) is taken into consideration for tax calculations.

If you set an employee to be assessed on a Week 1 basis, then previous payments are ignored and tax is calculated as if it was the 1st week of the year.

If you set an employee to be assessed on an Emergency Tax basis, Collsoft will calculate the tax due on the employee's earnings at the higher rate with no tax credit.
This is dependent on whether a PPS Number has been provided by the employee or not. For more details on how emergency tax works visit

Note: You should only set an employee to be taxed on a Week 1 basis if you have been advised to do so by the Tax Office or your Tax Advisor
Creation date: 02/01/2015 23:46      Updated: 02/01/2015 23:46
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