Payroll Tax Estimator: Cumulative Withholding and Why Each Month Differs
Payroll tax in China is withheld cumulatively: add up income from January to the current month, subtract the cumulative basic deduction, social insurance, and special additional deductions, apply the annual rate table, then subtract what has already been withheld.
When an estimate is useful
Payslip checks, budgeting after a raise or job change, and comparing bonus options all benefit from a rough monthly net figure.
The point of an estimate is catching anomalies early: if a payslip is wildly different from the calculation, a deduction or a declaration is usually the reason.
- Checking that a payslip deduction is in the right range.
- Estimating take-home pay before accepting an offer.
- Planning cash flow around a bonus or a gap between jobs.
The cumulative method, step by step
The basic deduction is 5,000 yuan per month, or 60,000 per year. Cumulative taxable income is cumulative income minus the cumulative basic deduction, minus cumulative social insurance and housing fund contributions, minus cumulative special additional deductions, minus other deductions allowed by law.
The rate table is progressive from 3% to 45%. Once cumulative income crosses a bracket, the marginal rate for the current month jumps, which is why the deduction is small in January and larger later in the year even though the salary has not changed.
- Cumulative withholding and the annual reconciliation are different steps; the reconciliation can produce a refund or a top-up.
- Special additional deductions must be declared truthfully; missing one means too much is withheld during the year.
- A separate-taxation option for annual bonuses exists but is time-limited and not always better; compare both.
- Changing employer restarts the cumulative count, so estimate each employer separately.
Limits and disclaimer
This is an estimate only. It does not cover local variations, multiple income sources, labour remuneration, or year-end adjustments, and it is not tax advice. The withholding agent's filing and the official tax app are authoritative.
For anything with real money at stake, confirm with a qualified accountant or the tax authority.
- Income from several employers, royalties, and labour remuneration follow different combination rules.
- Back pay, one-off bonuses, and social insurance paid in several cities all push the actual deduction away from a simple estimate.
FAQ
Why is the tax deduction different every month?
Because withholding is cumulative. As the year-to-date total climbs into a higher bracket, the marginal rate rises, so later months deduct more even when the monthly salary is unchanged.
How is cumulative withholding different from the annual reconciliation?
Withholding is an instalment paid through the employer during the year; the reconciliation after year-end settles the exact liability and can refund or collect the difference.
Is separate taxation of the annual bonus better?
Not always. It depends on the bonus size and your total income; compute both ways for the year in question, and check whether the policy still applies.
Related tool：Income Tax