Compounding factor and Pay as you earn: Difference between pages

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imported>Doug Williamson
(Generalise to any number of periods.)
 
imported>Doug Williamson
(Add links.)
 
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(CF).  
''UK tax.''


A number greater than one which we multiply a present value by, to work out its [[Future Value]] (FV) as:
(PAYE).


FV = CF x present value.
The system used in the UK to collect income tax and national insurance contributions from employees.


Income tax and national insurance, together with other items such as student loan repayments and pension contributions, are deducted from wages and salaries by the employer, throughout the tax year.


The periodic Compounding Factor is calculated from the periodic yield as:


CF = ( 1 + periodic yield )<sup>n</sup>
== See also ==
 
* [[Collect]]
Where:
* [[Income Tax]]
 
* [[National Insurance]]
n = number of periods
* [[Pension]]
* [[Tax]]


 
[[Category:Accounting,_tax_and_regulation]]
'''Example'''
 
Annual effective yield (r) = 6%.
 
Number of years in the total period (n) = 2.
 
Then:
 
Compounding Factor = ( 1 + r )<sup>n</sup>
 
= 1.06<sup>2</sup>
 
= 1.1236.
 
 
== See also ==
* [[Compounding effect]]
* [[Discount factor]]
* [[Future value]]
* [[Present value]]

Revision as of 18:47, 4 September 2022

UK tax.

(PAYE).

The system used in the UK to collect income tax and national insurance contributions from employees.

Income tax and national insurance, together with other items such as student loan repayments and pension contributions, are deducted from wages and salaries by the employer, throughout the tax year.


See also

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