New job tax question

Use the calculator here

The fundamental figures that the calculations are done on are and for class 1 NI (employees)

hth

Daytona

If you were working in March and the company had your proper tax code it is likely that the tax taken off your payslips will be correct. It's easy to check on-line as all the information will be on your 31 March payslip.

Tax refunds occur, for example, when you work for the first half of a tax year only.

Unlikely, unless you are on a BR or M1/W1 tax code.

"Proper" tax-code? I just had the "standard" 461L last year, and have the

474L one this year. Are you saying I should have had a different one last year to take account for the fact that I was only earning for 8/12 months that year?

I have been trying to work out how much tax I *should* have been paying last year and how they calculated how much they actually took from me. My main problem is, in which order do they take off my tax, NI and pension contributions from my gross salary?

The IR site is rubbish, who/where do I phone up to sort this out? They have a list of "helplines" but nothing that was related to my problem. I guess they don't want to give any money out :-)

How do you know that you've paid 8/12 of the annual tax.

The PAYE calculations are done so that at month 12 you will have paid the correct tax regardless oif which months you did or didn't work (except that you must work month 12).

The only exception to this is if you are on a M1 code.

tim

If it was your first job since leaving education (as it appears to be), your employer should have given you form P46 to complete (which asks you, among other things, whether you were working before). You should then have been given 'emergency' code of 461L (as you appear to have). This entitled you to earn 1/12 of personal allowance (385) each month before paying tax. But no tax would have been deducted until you used up allowances in the months you weren't working, around 385x4=1,540. To check if you've paid the right amount of tax, look at your P45 (you should have received this from your employer). This tells you how much you earned gross (before deductions) and how much tax and NI you paid. Your taxable pay is gross pay minus pension contributions minus 4,615 (assuming you don't have fringe benefits like company car). The first 1,960 is taxed at 10%. Then the rest at 22% (up to 30,500, anything above at 40%). Add them together and you get the total income tax due. If it's the same as what's on P45, you've been taxed correctly. If it's less, speak to your payroll dept and contact your tax office for repayment.

Alec

"scott" wrote

Why do you think it matters which order you do it in? If you take three numbers away from one big number, it doesn't matter which of the smaller numbers you subtract first or last ...

I don't understand though, in FY03/04 I only earned 8/12 of my annual salary, although I still paid 8/12 of the annual tax, surely that is not correct?

"scott" wrote

Did your tax code end "month 1" ?

I think what he meant was if the tax was worked out before or after deducting pension contributions (after is the answer). Class 1 NI contribution has nothing really to do with income tax, as it's worked out separately from gross pay and simply deducted from your after-tax pay.

Alec

Yes you do. Pension contribtions are tax-deductible.

The same goes for NI, do I work out the NI

Before. You pay NI on the whole lot (minus fringe benefits and expense payments if any). But this is worked out quite separately and doesn't affect the amount of income tax you pay.

Alec

As I said, speak to your payroll people and find out where your tax office is. Phone or write to them and ask for repayment claim form R40 (or download from the link below). You'll need your P45 (or equivalent) and any tax vouchers (from share dividends, savings etc). Take a photocopy. Send it off and wait for the cheque or direct payment to your bank account (quicker). See details in

Alec

But calculating tax depends how much you have to start with! What I mean is, do I subtract my pension contribution then work out the tax from the resulting figure, or vice-versa. The same goes for NI, do I work out the NI amount before or after subtracting my pension contribution?

Thanks, that makes sense. In FY03/04 I paid 2393.44 tax total according to my pay-slips. I also earned 15552.61 gross in that same period (again, according to my pay slips).

SO first I subtract my pension contributions, these total 880 in that period, so that gives 14672.61. Then I take off my personal allowance for last year, 4615, that gives 10057.61.

So the tax I should have paid is 10% * 1960 = 196 and then 22% of (10057.61-1960) = 1781.47

That gives 1977.47 which is 415.97 less than I actually paid.

Is this correct? Will the IR have a record of all this or will I have to explain it to them?

Nope, it just says 461L on all my payslips from the first one until march04.

No. It is normal when you start a new job for the employer not to have received your tax code from the Inland Revenue by the first pay day, or two. You will then usually pay too much tax for the first couple of months with this being corrected once the tax code is received. Once the tax code has been issued, it is yours until the next April. At the end of the year you should have paid no tax on the first 4615 (or 4745) of earnings 10% tax on the next 1960 (2020), 22% on the next 30500 (31400) and 40% on anything more. For example, on a salary of 20k you could check your 3150 of income tax like this:

Earnings Tax Rate Tax

4615 0 0 1960 10% 196 13425 22% 2954 _____ ____ 20000 3150

(Of course you can use an online calculator instead. There is one for this year here

) If you stop working in the middle of the year you will have paid tax on the PAYE assumption that you would work until the end of the year (and beyond) so you will have paid too much tax. If you are working in March there is usually no need for assumptions as the earnings for the year will be known.

Your pension contributions would normally already had tax relief applied. Is it a company pension scheme, or a personal one?

"tim" wrote

Not so. I'm still on tax code "474L month 1" because the IR haven't got their arses into gear and sorted it out. This means that the tax being calculated is actually incorrect, and if this continues until the end of the tax year then I will *not* "... have paid the correct tax regardless oif which months you did or didn't work (except that you must work month 12)". There will be a small amount due for refund.

how does what you have posted differ from what I said.

"the only exception is if you are on a M(onth)1 code"

You posted

"I am on a Month 1 code"

?????

tim