Calculate your retention or witholding tax that you pay on a payslip to your employee so that your business knows what is taxed on each employee.
The fiscal retention or withholding tax rate is the amount of tax on labour immediately claimed by your government‘s internal revenue service. This is in contrast to an employee’s usual tax return where you either claim back or declare taxes. Use this calculator to know how much your company will be paying. You can also look at your Net Income Calculator to see what your business takes home after tax.
What is retention tax?
Retention tax is the tax a business pays directly to the government when handing out the paycheck of the employee. This is so the employee does not have to owe tax after a working year, having already paid it via their employer. A business needs to know the retention tax rate so that they can pay the income tax on their employees and find out their Net Income.
What countries charge retention tax?
Virtually all countries charge retention tax. Some will call it Withholding Tax in their taxation laws. Retention taxes can vary from country to country. Some countries charge very little and based on various factors including income brackets. The United Kingdom generally charges a 20% retention tax with some exemptions.
Your business will need to rely either on a third party payroll manager or your business’s responsible actor for the payroll. They will deduct the percentage from the gross salary the employee based on the country they are paid in. Pay attention to international corporate law if the employee is working remotely from a different country.
How do I calculate my retention tax in the UK?
The retention tax, mostly known as withholding tax in the British Isles, is indicated under the acronym WHT. The United Kingdom has a 20% corporate withholding tax. You thus have to deduct 20% from the employee paycheck to go to HMRC.
To use our online calculator, make sure you know what the retention tax rate in your country is. Our calculator has 20% set to default, but you can change this by inserting a different percentage into the field.
Next, add the income of the employee payslip.
Hit the calculate button and you will see the figure that you need to subtract from the gross salary and that will be required to pay out immediately to your internal revenue service.
