how to gross up net amount? Watch

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angel_eyes
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#1
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#1
Does any one know how to gross up the net amount to find the sum before deductions? I do not understand the formula
For instance if the net income was £800 then what will the gross income will be?
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Swayum
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#2
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Net income is just gross income - tax, isn't it? What's the tax rate here?

Also, please post in the correct forum. Just because you think you've got a university level question doesn't mean you post in the university forum - it still goes under academic help.
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angel_eyes
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(Original post by Swayum)
Net income is just gross income - tax, isn't it? What's the tax rate here?

Also, please post in the correct forum. Just because you think you've got a university level question doesn't mean you post in the university forum - it still goes under academic help.
Net is after income tax deductions and gross is the amount before deductions. It is important for tax payers to 'gross up' to pay the correct amount of tax. The current basic rate is 20%.

P.S
I did not know where to post this question.
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Swayum
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Ok, so you know that 80% of gross income = net income. Yes? Call gross income G and net income N, then we can rewrite it as

80% of G = N

What's the mathematical equivalent of "80% of"? From there it's just a simple rearrangement.
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angel_eyes
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(Original post by Swayum)
Ok, so you know that 80% of gross income = net income. Yes? Call gross income G and net income N, then we can rewrite it as

80% of G = N

What's the mathematical equivalent of "80% of"? From there it's just a simple rearrangement.
I am lost.
By the way this is the formula which I can't seem to work out.

Interest x 100 / (100 - rate at which tax deducted)

Lets say interest is £800 and the basic tax rate is 20%.
I know the answer is £200. How? I have no clue :s
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Swayum
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£200 is the amount of tax being paid, not the gross income (think about it, how could the gross income be less than net)? That formula works out the gross income, but is a silly way of thinking about it.

Why are you lost with what I said? Which part do you not understand?
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angel_eyes
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(Original post by Swayum)
£200 is the amount of tax being paid, not the gross income (think about it, how could the gross income be less than net)? That formula works out the gross income, but is a silly way of thinking about it.

Why are you lost with what I said? Which part do you not understand?
Yeh I understand that the £200 is the deducted amount so the gross sum will be £1,000.
I know it is £200 because I was told it is that amount. How to get to this figure is confusing me. I need to know the method so I can apply it in future.

Lets say if I had net interest of £600 then how will I 'gross up' this amount to get the deducted amount...in light of the above formula?
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Euclid
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(Original post by angel_eyes)
Yeh I understand that the £200 is the deducted amount so the gross sum will be £1,000.
I know it is £200 because I was told it is that amount. How to get to this figure is confusing me. I need to know the method so I can apply it in future.

Lets say if I had net interest of £600 then how will I 'gross up' this amount to get the deducted amount...in light of the above formula?
Right clear things up. What are you trying to find and what do you know already? Tax is 20% of the gross income and so since this amount is deducted, you would get 80% of the gross back - as has already been shown this means net income = 0.8 x gross income.

If you know the net income and want to find the gross income, you re-arrange the above to make gross income the subject of the equation i.e divide the net income by 0.8 - notice this is equivalent to multiplying by 1/(0.8) which = 1/(1-0.2) = 1/(1-(20/100)) = 100/(100-20) which is your stated equation. Is is much easier to divide the net income by (1 - 0.2). Can't put it any simpler.

If the net income is £600 and the tax rate is 0.2 (20%) then the gross should be 600/(1-0.2) = 600/0.8.
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Jeepers
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You have all got it wrong. Net pay is the gross pay with tax AND National Insurance deducted.

The current (2010-11) rate of tax is 20% and is charged on the amount over your tax code allowance (tax code*10)+9)/(number of pay periods in tax year) i.e. 12 for monthly, 52 for weekly etc. BR tax code = 20% on everything, NT = no tax.

The current rate of NI is 11% and is charged on earnings in excess of 5715 (divided by the number of pay periods in the tax year).

There is, as far as I am aware no one pass formula that will calculate the gross from a net amount due to the difference in the NI'able and taxable amounts. The problem is that the percentage of deductions against the net will always change due to the difference between the taxable and NI'able amounts increasing and decreasing in line with the net pay but the difference between the NI and Tax free portion remaining the same.
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ontherazzle
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#10
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#10
I know this is an old thread but I can't believe how complicated people have made things! Just in case anyone else comes across it and wants to know the simple formula:

The total amount of income, before deductions, is 100%. If tax is taken off at a rate of 20% that means your net income, after tax, will be 80% of your gross income (100%-20%=80%). So the net figure you have is 80% of the gross figure you are trying to find. Simply divide the net figure by 80 to find 1%, then multiply it by 100 to find 100%.

If your net earnings are £800, dividing £800 by 80 gives £10, and multiplying it by 100 gives £1000.
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saineegan
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#11
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#11
Please don't over complicate this simple question very simple formula for 20% tax rate on a net of say 600 just use 100/80=1.25
therefore 600*1.25=750
on 40% tax rate use 100/60=1.67 so net of 600=600*1.67=1000
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Old_Simon
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#12
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#12
there are net to gross online calculators for this sort of thing.
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kutz deluxe
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#13
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#13
its easy you just plus your net figure by 25% to get your gross figure that's if your deductions are 20% self employed basis
im having to do my ax rturns and cant be bothered t go through all the payslips just add all my net figures up then plus 25%
say £750 gross-20% tax = £750 -£150= £600 net ---£600net + 25% =£150+£600net =£750 gross
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Adrien Willcocks
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#14
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#14
To find gross: What is gross when net is £147 say tax rate 20%
Find what 1% is = £147 divide by 20 = 7.35. Then just multiply by 100. Equals £735 Gross.
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TenOfThem
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#15
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#15
(Original post by Adrien Willcocks)
To find gross: What is gross when net is £147 say tax rate 20%
Find what 1% is = £147 divide by 20 = 7.35. Then just multiply by 100. Equals £735 Gross.
Just to clarify - This is INCORRECT

You should have divided by 80, not 20
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Adrien Willcocks
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#16
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#16
[QUOTE=TenOfThem;47265242]Just to clarify - This is INCORRECT
Correction to mine above
read "tax is £147" not net.The net is of course the difference after to tax = £735 minus £147 =£588.
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TenOfThem
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#17
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(Original post by Adrien Willcocks)
[
Correction to mine above
read "tax is £147" not net.The net is of course the difference after to tax = £735 minus £147 =£588.
This will not answer the question asked as the OP has not been told what the tax is, they have been told the net pay

(net pay) / 0.8 = (gross pay)
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Hshshsgsgs
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#18
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#18
£100 x 0.80 will give you a deduction of 20%
£100 x 0.76 will give you a deduction of 24%
£100 x 0.32 will give you a deduction of 68%
£100 x 0.99 will give you a deduction of 1%
This is the easiest equation for deducting any percentage necessary on any sum of money.

To add the percentage back on assuming you only have the net figure and you know the deducted percentage it is simple.

Assuming the net amount is £80.

£80 divided by 0.80 will give you the figure that was subject to a 20% deduction. A lot of people confuse this process by adding 20% to £80 but this will not work as you are assuming £80 is 100% of the value where is it not it is 80% of the gross value which can be confusing.
Quick break down.

Right way.
£100 (gross before deductions) x 0.8 = £80 (net after deductions)
£80 (net) divided by 0.8 = £100 (gross)

Wrong way.
£80 (net) + 20% = £96

This happens because adding 20% to £80 gives the assumption that £80 is the gross and not the net which means it is 100% of the total amount.


The reason the sum works is this
1.00 is 100%
So any number e.g £100 x 1.00 will = £100 as we all know 1 multiplied by any number will always be the same number.
0.99 equals 99%
0.98 equals 98%
Etc etc.
so to add a percentage value I.e 30% you would multiply a number by 1.30 (100% plus addition 30%) but to deduct 30% you would multiply a number by 0.70 (less 30% off the 100% starting point which would be 70%)
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sarahpog
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#19
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#19
If this is just to calculate total Gross before tax deduction (not national insurance too) then its a very simply calculation.

Assuming the £800 is `net (after deduction of) of Basic Rate Tax' (on either savings/income) then it's:

£800 / 0.8 = £1000 ........ The 0.8 is the numerical equivalent of 20/100.

Or if it's 40% tax it's:

£800 /0.6 = £1333.33
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STEFANSHOLM
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#20
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#20
(Original post by angel_eyes)
I am lost.
By the way this is the formula which I can't seem to work out.

Interest x 100 / (100 - rate at which tax deducted)

Lets say interest is £800 and the basic tax rate is 20%.
I know the answer is £200. How? I have no clue :s
The formula is to take the net amount £800 and divide it by the tax rate from 100=

800/1-0.20 = 1000

20 % 1000= 200

800+200= 1000
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