How is my furlough pay calculated?

April 20, 2020 • 3 min read

The government will pay up to 80% of furloughed workers’ salaries, up to £2,500.

Here we’ll take a dive into how much of that you’ll take home.

Your take home pay

Here’s what’s used to calculate your take-home pay:

Base furlough pay
Pension contributions
Student loan repayments
Taxable income
Income tax
National insurance contributions

Let’s take it step by step…

Base furlough Pay

The government will pay up to 80% of furloughed workers’ salaries, up to £2,500.

Let’s imagine Tom normally earns £24k a year, which is £2,000 per month. His base furlough pay will be 80% of £2,000. That works out as £1,600k per month.

Now let’s consider Amy, who earns £48k a year. She’ll get £4,000 per month. 80% of £4,000 is £3,200, but hold on! That’s over the £2,500 furlough pay limit. So Amy’s base furlough pay is £2,500 per month.

Pension contributions

The minimum pension contribution for employees in the UK is 5%. We’ve set 5% as the default in our calculator, but you can pop in your own percentage if yours is different.

So, Tom’s pension works out as 5% of his base furlough pay (£1,600), which is £80.

Amy’s pension is 5% of £2,500, which is £125.

Student loan repayments

If you have a student loan, there are a few types of repayment plan that you could be on.

The key point is that there’s a “threshold” amount that you have to earn over in order to make student loan repayments. 9% of everything that you earn over that “threshold” is paid towards your student loan each month (6% if you have postgraduate student loan).

Tom is on “Plan 1”, which has a “threshold” of £1,615 per month. As Tom’s base furlough pay is £1,600, he doesn’t have any student loan repayments

Amy is on “Plan 2”, which has a “threshold” of £2,214 per month. Her base furlough pay is £286 more than the threshold.

So, we need 9% of £286. That means that Amy has £26 of student loan repayments this month.

Taxable income

Before we can start taking away your tax and national insurance contributions, we need to work out your taxable income.

As pension contributions and student loan repayments happen before tax, we’ll subtract them from your base furlough pay to arrive at your taxable income:

Base furlough pay - pension contribution - student loan repayments = taxable income

Tom: £1600 - £80 - £0 = £1520

Amy: £2500 - £125 - £26 = £2349

Income tax

Your income is tax-free for your first £12.5k earned. Then, between £12.5k and £50k you’re taxed 20%, from £50 to £150k you’re taxed 45%, and anything above that is taxed 45% (government guidance here).

We’re thinking in months rather than years, so let’s do the same for tax bands by dividing everything by 12 (amount of months in a year):

No tax on first £1,042 (“personal allowance”)
20% on everything between £1,041 and £4,167 (“basic rate”)
40% on everything between £4,167 and £12.5k (“higher rate”)
45% on everything above £12.5k (“additional rate”)

Tom’s taxable income is £1520. He gets no tax on the first £1,042. This leaves £478 that falls into the basic rate.

So, Tom’s income tax is 20% of £478 which is £96.

Amy’s taxable income is £2349. She also gets no tax on her personal allowance, leaving £1333 for the basic rate of tax.

This works out as £262 of income tax for Amy.

National insurance

Most people pay nothing towards national insurance on the first £792 they earn per month, 12% on everything between £792 and £4167, and 2% on everything over £4167 (government guidance here).

Tom pays no national insurance on the first £792 of his taxable monthly income, and 12% on the remaining £728. As a result, Tom pays £87 in national insurance contributions.

Amy also pays nothing on the first £792 of her taxable income and 12% on the remaining £1557. So Amy pays £186 towards national insurance.

Take-home furlough pay!

Now time to put it all together!

The calculation goes like this:

(Base furlough pay - pension contributions - student loan repayments) - income tax - national insurance = take-home furlough pay

For Tom:

(£1600 - £80 - £0) - £96 - £87 = £1337 per month

For Amy:

(£2500 - £125 - £26) - £262 - £186 = £1901 per month

We hope that makes sense! If you have any suggestions for improvements we’d love to hear them. Feel free to get in touch on our Facebook or Twitter.\ \ To get a super-accurate calculation of your furlough pay, you can use a payroll software such as Onfolk.

Written by Jack Cully who lives and works in London building useful things. You can follow him on Twitter