The payroll tax tables (T4032) are derived by taking the pay for the pay period, turning it into an annual equivalent, calculating annual tax due on that equivalent and then dividing it back down to the relevant pay period cycle.
Tax is calculated on a per period basis through a simple comparison of the taxable pay for the period with the correct tax table. Peaks and troughs in income are taxed by reference to the table on a non-cumulative basis. This is likely to result in over/under payments and these will be corrected via the individual's annual tax return (see Tolley's Global Mobility: Personal Taxes, CA1.9.1 for more on reporting requirements).
To avoid large discrepancies between withheld tax and the final tax liability, special procedures must be followed when calculating tax on a pay period with one-off payments.
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Web page updated on 17 Mar 2025 14:02