SCHEDULE 2Calculation of earnings

Calculation of net earnings of employed earners 9

1

For the purposes of paragraphs 2 (calculation of earnings) and 5 (calculation of earnings of employed earners) the earnings of an individual derived from employment as an employed earner to be taken into account are, subject to sub-paragraphs (2) and (3), their net earnings.

2

There is disregarded or deducted as appropriate from an individual’s net earnings—

a

any sum, where applicable, specified in paragraph 14 (sums to be disregarded in the calculation of earnings), and

b

any care charges to which paragraph 15 (care charges to be deducted in the calculation of earnings) applies up to a maximum deduction, in respect of such care charges incurred by any individual, of 50% of their net earnings less those sums, if any, specified in paragraph 14 which are disregarded.

3

For the purposes of sub-paragraph (1) net earnings are calculated by taking into account the gross earnings of the individual from that employment, less—

a

any amount deducted by way of—

i

income tax,

ii

primary Class 1 contributions under the 1992 Act, and

b

one half of any sum paid by the individual in respect of a pay period by way of a contribution towards an occupational or personal pension scheme.