Sometimes my pay goes into the next tax bracket
ConMan
Posts: 108 Forumite
in Cutting tax
Hi Guys, not at all clued up on this so hopefully someone can help.
I get paid 4 weekly. My salary is £22500.
However, some months, I'll smash the overtime get bonuses. for example, in June my Gross was £3657. So how does this work. some of that June pay get overly taxed because it was a high pay month. By the end of the tax year, my gross would be slightly less than 40k as sometimes I can't be bothered doing any ot at all.
I know you might need some more info, so let me know if there is any other information you need.
Tia
I get paid 4 weekly. My salary is £22500.
However, some months, I'll smash the overtime get bonuses. for example, in June my Gross was £3657. So how does this work. some of that June pay get overly taxed because it was a high pay month. By the end of the tax year, my gross would be slightly less than 40k as sometimes I can't be bothered doing any ot at all.
I know you might need some more info, so let me know if there is any other information you need.
Tia
You'll find me sat in the corner with a pack of dry roasted and a Guinness.
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Comments
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its called PAYE
Pay As You Earn, as your paid 4 weekly your salary is divided by 13 and any amount over your allowance is taxed accordingly, Its entirely possible you are getting refunded the following month, I know I do, However if you don't you will get a rebate at the end of the tax year0 -
each time you are paid the cumulative total pay to date is worked out and taxed at whatever tax rate would apply to that pay when converted to an annual value (amount c). That value is then taxed at whatever tax band(s) it falls into . The total tax due from that calculation is amount a)
the tax amount calculated above (amount a) is then compared to the tax you have already paid to date, it is the cumulative total of all tax already paid on previous pay periods that tax year. (amount b)
Normally amount a) is bigger than amount b), so you end up having a bit of tax deducted from the current pay period
however, where your pay is wildly variable and therefore your amount c) sometimes falls into a higher tax bracket one month and then drops back below that in later months, the effect of that is that amount b is bigger than amount a and you end up getting a refund of tax in that pay period
Note - the above assumes you are on a "cumulative" tax code, ie not a code which ends with a 1, eg: NOT 1150L M1
there are many websites which explain the above in more detail and/or more clearly, have a read of some, for example:
https://www.moneyadviceservice.org.uk/en/articles/understanding-your-payslip
https://www.gov.uk/understanding-your-pay/pay-calculations-if-you-work-shifts-or-get-bonuses
https://www.citizensadvice.org.uk/debt-and-money/tax/how-to-pay-income-tax/the-pay-as-you-earn-paye-system/
Note - national insurance operates differently - it is not cumulative and is simply applied to the amount earned each pay period in isolation. You cannot "overpay" it since it is the exact amount due on what you earned, so it cannot (normally) be refunded.0 -
Hi,
Note - the above assumes you are on a "cumulative" tax code, ie not a code which ends with a 1, eg: NOT 1150L M1
So my tax code is 1150L. Does that mean everything you said prior to that doesn't apply. Should I expect a rebate at the end of the year, or should my tax be adjusting month to month?You'll find me sat in the corner with a pack of dry roasted and a Guinness.0 -
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Hi,
So my tax code is 1150L. Does that mean everything you said prior to that doesn't apply. Should I expect a rebate at the end of the year, or should my tax be adjusting month to month?
The code 1150L is the code that most people are on, it is the starting point and only alters if you have something to change it, eg a taxable benefit or tax owing from last year. It is the M1 (also called month 1 week1 or non-cumulative)bit that is significant. Different payroll systems show this differently so if you are not sure post from your last payslip the taxable gross to date and the tax paid to date along with the week number (or date of payment) and it can be checked.0 -
did you bother to read any of the links i gave you?Hi,
So my tax code is 1150L. Does that mean everything you said prior to that doesn't apply. Should I expect a rebate at the end of the year, or should my tax be adjusting month to month?
try this one as well https://www.gov.uk/tax-codes0 -
did you bother to read any of the links i gave you?
try this one as well https://www.gov.uk/tax-codes
Yeah, I did, I just got confused, because my tax code is 1150L, but then it says Cumulative. My understanding is that every month my tax is caluclated based on what I've earn't so far that year. Meaning that my tax is correct and I won't get a rebate. Well, that's my understanding at least...You'll find me sat in the corner with a pack of dry roasted and a Guinness.0 -
Yeah, I did, I just got confused, because my tax code is 1150L, but then it says Cumulative. My understanding is that every month my tax is caluclated based on what I've earn't so far that year. Meaning that my tax is correct and I won't get a rebate. Well, that's my understanding at least...
If it says cumulative after your tax code then yes your tax is correct.0
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