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If you want to pay your employees a set net amount, rather than a gross amount, your company is liable to pay tax and National Insurance liabilities for that pay item.
To do this, add a gross-up pay item to an employee’s payslip. UK Payroll will automatically calculate the tax and NI due on the specified net amount, and add it as a total gross amount to the payslip.
Note: If the employee has net deductions, such as a Student Loan, or the gross-up item is marked as pensionable, the net figure will vary.
Before you begin
As tax can be cumulative, and both tax and NI are subject to thresholds, the Gross-up calculation should only be added to the payslip once all other gross additions and deductions have been added.
Therefore, make sure all other payslip adjustments are complete. Then, follow the instructions below to add a gross-up pay item.
The employee’s current earnings will determine the amount of tax and NI due on the payment. For example, if the employee is a basic rate taxpayer and their pay prior to adding the gross-up exceeded the threshold for tax and NI, then the gross-up would be calculated using basic rate thresholds. To learn more, see HMRC’s How to gross-up guidance.
How to add a gross-up pay item to an employee
- From the left side bar, click Payrolls.
- Select the relevant payroll draft.
- Select the relevant employee.
- Click Add Pay item > + Gross-up addition.
- Fill in the Add a gross up addition pop-up. Toggle the Pensionable addition option if you want the pay item to be included in the pension calculation.
- Click Complete. The Summary section will display a breakdown of the net amount, and tax and NI due. The value next to Gross addition is the amount that will be added to the payslip.
- Click Add gross-up addition.