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Tax Calculation
THE_ROCK84
Posts: 222 Forumite
in Cutting tax
Hi all, im not sure if this the right place to post. Basically im a student and starting my industrial placement on 1st August 2005 till 31th July 2006.
I have been told that im working over TWO tax years (between April 05/06 & and April 06/07) so does that mean i have two £4195 allowances for each financal year?
My total wage is £14000 gross. How can i roughly calculate how much im going to earn in total after tax?
I have been told that im working over TWO tax years (between April 05/06 & and April 06/07) so does that mean i have two £4195 allowances for each financal year?
My total wage is £14000 gross. How can i roughly calculate how much im going to earn in total after tax?
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Comments
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Welcome to the real worldTHE_ROCK84 wrote:...im a student and starting my industrial placement...
- Just kidding!
I assume you mean *one* for *each* year? Yes you do, but I believe the standard personal allowance is now £4,895.THE_ROCK84 wrote:I have been told that im working over TWO tax years (between April 05/06 & and April 06/07) so does that mean i have two £4195 allowances for each financal year?
The following is for 2005/06. For 2006/07, the "4895" will probably (hopefully) increase slightly.THE_ROCK84 wrote:My total wage is £14000 gross. How can i roughly calculate how much im going to earn in total after tax?
Gross Pay.......................................... £14,000
Personal allowance...............................£ 4,895
Taxable pay........................................£ 9,105
Tax (10% on 1st £2,090 of taxable pay)...£ 209
Tax (22% on rest of taxable pay)............£ 1,543.30
Total tax............................................£ 1,752.30
National Insurance...............................£ 1,019.48*
*(Gross pay-(91*52))*11%
Total Deductions.................................£ 2,771.78 (Tax + NI)
Net pay.............................................£ 11,228.22 (£935.69/month)
HTH
YB
PS: Sorry about the poor formatting!0 -
Each year you get your personal allowance, and your tax is calculated on earnings in the tax year in which you received the money.
So, from 6 April 2005 to 5 April 2006 is the current tax year. You have your personal allowance of £4895, and anything above that will be taxed.
Then from 6 April 2006 to 5 April 2007 is a differnet year, and again you will get your personal allowance.
To calculate how much tax you will pay this year, first work out how much you will be paid u to 5 April 2006. Take off £4895 to leave you with the taxable amount. Then the next £2090 will be charged at 10%, and anything left over will be charged at 22%. (There is a further tax bracket of 40%, but you will not earn enough to go into that from what you have said earlier).
That calculation does not include national insurance.0 -
Yes, TWO. Where does the £4195 figure comes from? For 05/06 it is £4895, for 06/07 - tba.THE_ROCK84 wrote:I have been told that im working over TWO tax years (between April 05/06 & and April 06/07) so does that mean i have two £4195 allowances for each financal year?
http://www.hmrc.gov.uk/rates/it.htm
Payslip CalculatorHow can i roughly calculate how much im going to earn in total after tax?
For Tax Code read 'Understanding Your Tax Code'. I gues yours is or will be 490L (not sure).0 -
And don't forget when you finish your placement next year, to claim some of the tax back for 06/07.
Tax will be automatically deducted from your pay, and the way PAYE works it assumes you will be in work until the end of the tax year. So if you are only going to work until the end of July you will have overpaid tax in 06/07. There is no way around this unfortunately. You will need to go to your tax office and explain that you will be returning to study and will not work again for the rest of the tax year.0 -
yorkshireboy's calculation is assuming you are paid £14k in just one tax year. As your £14k will be split over 2 tax years, this makes quite a difference (assuming you have no other earnings). For this tax year (05/06) the calculation below is how much you will pay (roughly). Then a further calculation is needed for the next tax year, although it is likely you will have further earnings after this placement, so a calculation for that year would be pointless at the moment.
Assuming you get paid £1166 (£14000/12) per month on the last day or each month, then in the 05/06 tax year you will be paid 8 times a total of £9382, and in 06/07 4 times, a total of £4664. For NI assuming each month is 4 weeks.
So for 05/06:
Pay £9382
Personal Allowance £4895
Taxable Pay £4487
£2090 x 10% £209
£2397 x 22% £527
Total Tax £736
NI £701
Total Deductions £1437
Ni Calc: Pay-(94*32)x11%
Not sure if I got the NI right or not, it might be wrong, but should be alright as an indication.
Remember: There are a lot of assumptions in this calculation, so it is not going to be accurate.0 -
ctm wrote:yorkshireboy's calculation is assuming you are paid £14k in just one tax year. As your £14k will be split over 2 tax years, this makes quite a difference (assuming you have no other earnings).
Ok i understand, so what will the total net paid over 12 months after tax and NI (over the 2 tax years split)??0 -
THE_ROCK84 wrote:Ok i understand, so what will the total net paid over 12 months after tax and NI (over the 2 tax years split)??
Difficult to say. All depends on what you do after your placement ends. If you then don't earn untill after 6 April 2007, then you will earn less than your personal allowance in 06/07, so no tax due. Still NI though.
Although no tax would be due, you will pay some due to the way the tax system works, which you would have to reclaim from the inland revenue.0 -
ctm wrote:Difficult to say. All depends on what you do after your placement ends. If you then don't earn untill after 6 April 2007, then you will earn less than your personal allowance in 06/07, so no tax due. Still NI though.
Although no tax would be due, you will pay some due to the way the tax system works, which you would have to reclaim from the inland revenue.
im not work after the placement at all, i looking for a rough educated estimate? £120000 -
OK then...
This explanation only relates to the tax year 05/06. As has been explained earlier, the following year will be calculated similarly, but not worth doing now as your circumstances and the IR allowances will have changed by then.
If you *only* work for the 8 months from 1/8/05 to 31/3/06 in the current tax year, you will have overpaid your tax by £1,026.67. This figure is derived from...
(14,000-9,333.33)*22%
ie you will only gross £9,333.33 (£14,000/12*8) but will have paid tax based on your (perceived by IR) yearly earnings.
You will need to submit your P60 to the IR as soon as you get it (must be given to you by 31st May 2006) for them to calculate your overpayment and get a cheque off to you. If you wait for them to do it automatically, it could take until September 2006 to resolve - speaking from experience here as my wife has gone through this process.
The top and bottom of it?......
You will draw £935.69 each month and get a cheque for £1,026.67 (plus interest) shortly after the 05/06 year end.
Total net earnings for August 2005 to March 2006 will be......£8,512.19
I THINK!!!!!!0 -
YorkshireBoy wrote:OK then...
This explanation only relates to the tax year 05/06. As has been explained earlier, the following year will be calculated similarly, but not worth doing now as your circumstances and the IR allowances will have changed by then.
If you *only* work for the 8 months from 1/8/05 to 31/3/06 in the current tax year, you will have overpaid your tax by £1,026.67. This figure is derived from...
(14,000-9,333.33)*22%
ie you will only gross £9,333.33 (£14,000/12*8) but will have paid tax based on your (perceived by IR) yearly earnings.
You will need to submit your P60 to the IR as soon as you get it (must be given to you by 31st May 2006) for them to calculate your overpayment and get a cheque off to you. If you wait for them to do it, it could take until September 2006 to resolve - speaking from experience here as my wife has gone through this process.
The top and bottom of it?......
You will draw £935.69 each month and get a cheque for £1,026.67 (plus interest) shortly after the 05/06 year end.
Total net earnings for August 2005 to March 2006 will be......£8,512.19
One would hope that the original poster would be on a culmulative tax code for the current year, and as he will be working until the end of the year, then he will not overpay tax. That is of course assuming the culmulative code, and no previous earnings in this year.
So, The Rock, when you start working, check to see what tax code you are on. It should be 489L. If it has Wk1/Mth1, or an X after it, then ring up the Inland Revenue, state that you have no previous earnings in this tax year, and want to be on a culmulative tax code. That way you will not overpay tax in this tax year.0
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