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    • whambam
    • By whambam 10th Sep 17, 9:00 PM
    • 179Posts
    • 22Thanks
    whambam
    Income Tax Personal Allowance
    • #1
    • 10th Sep 17, 9:00 PM
    Income Tax Personal Allowance 10th Sep 17 at 9:00 PM
    How does it work nowadays?

    When I was working before they used to give you an allowance on both income tax PAYE and National Insurance? You used to use up your allowances for the first 5-6 months of the year THEN start to pay tax as your allowances on both Income Tax and NI have been used up for that financial year.

    Has things changed or still the same?
Page 1
    • Caz3121
    • By Caz3121 10th Sep 17, 9:12 PM
    • 10,848 Posts
    • 7,076 Thanks
    Caz3121
    • #2
    • 10th Sep 17, 9:12 PM
    • #2
    • 10th Sep 17, 9:12 PM
    When I was working before they used to give you an allowance on both income tax PAYE and National Insurance? You used to use up your allowances for the first 5-6 months of the year THEN start to pay tax as your allowances on both Income Tax and NI have been used up for that financial year.
    Originally posted by whambam
    PAYE tax your allowance would be spread over the year, e.g. you will receive 1/12th of the allowance per month and tax calculated each month if paid monthly
    NI is also based on pay period and is payable if earned over £x that week/month https://www.gov.uk/national-insurance
    • 00ec25
    • By 00ec25 11th Sep 17, 1:17 AM
    • 5,384 Posts
    • 4,734 Thanks
    00ec25
    • #3
    • 11th Sep 17, 1:17 AM
    • #3
    • 11th Sep 17, 1:17 AM
    income tax has NEVER worked the way you describe, if you are in PAYE, you do not suddenly start paying tax part way through the year.
    If not in PAYE, you pay tax (in simple terms) when you do a tax return

    Read the many websites that explain the facts you are looking for:
    http://lmgtfy.com/?q=how+does+uk+income+tax+work

    NI works on the basis that every time you get paid you get taxed in isolation on that payment only and get the allowance against that payment. the next payment you get then repeats the same process, if you are paid weekly the current allowance is £157, if monthly £680.33. (If a director of a small company there are special rules around annual payments)
    Last edited by 00ec25; 11-09-2017 at 8:17 AM.
    • whambam
    • By whambam 11th Sep 17, 9:45 PM
    • 179 Posts
    • 22 Thanks
    whambam
    • #4
    • 11th Sep 17, 9:45 PM
    • #4
    • 11th Sep 17, 9:45 PM
    Yeah before I don't think I was in PAYE and was expected to do a tax return end of year.
    • 00ec25
    • By 00ec25 12th Sep 17, 7:26 AM
    • 5,384 Posts
    • 4,734 Thanks
    00ec25
    • #5
    • 12th Sep 17, 7:26 AM
    • #5
    • 12th Sep 17, 7:26 AM
    Yeah before I don't think I was in PAYE and was expected to do a tax return end of year.
    Originally posted by whambam
    then your ignorance of how tax works is astounding
    • agrinnall
    • By agrinnall 12th Sep 17, 8:29 AM
    • 18,547 Posts
    • 14,274 Thanks
    agrinnall
    • #6
    • 12th Sep 17, 8:29 AM
    • #6
    • 12th Sep 17, 8:29 AM
    then your ignorance of how tax works is astounding
    Originally posted by 00ec25
    Astounding but sadly (given the questions we see on here every day) not that surprising.
    • GillM
    • By GillM 20th Oct 17, 5:37 PM
    • 181 Posts
    • 207 Thanks
    GillM
    • #7
    • 20th Oct 17, 5:37 PM
    • #7
    • 20th Oct 17, 5:37 PM
    income tax has NEVER worked the way you describe, if you are in PAYE, you do not suddenly start paying tax part way through the year.
    Originally posted by 00ec25
    Sorry to drag up an old thread, but actually what the OP said does hold true when you start being paid - I have just started getting my occupational pension after 7 years of no income, and I have been advised that I won't start paying tax until my allowance is used up. Rather annoying as I'd prefer it to be spread over the 10 months but apparently they cannot do that.

    Of course, this is only for the first year when you start receiving the income part way through the year, from April next year my tax will be spread evenly throughout the year. It was just that when I first read the OP I had a vague idea that happened to me in 1976 when I first started work but I decided things obviously changed since then when further posts were so scathing!
    • sheramber
    • By sheramber 20th Oct 17, 7:06 PM
    • 3,875 Posts
    • 2,884 Thanks
    sheramber
    • #8
    • 20th Oct 17, 7:06 PM
    • #8
    • 20th Oct 17, 7:06 PM
    Starting to et your pension now means you have unused allowances from April up until now to be set against your pension.So you have 7/12 of your annual allowance unused up to October.

    For November you will have 8/12 of the annual allowance less what was used to cover your first month pension.

    For December you have 9/12 of the annual allowance less what has been used.

    and so until the end of the tax year.

    So you do get your allowance spread over the year but as you had no income up till now you have the unused ones to use up.

    Once they have been used up you will only have one month's allowance available.
    • molerat
    • By molerat 20th Oct 17, 7:09 PM
    • 17,349 Posts
    • 11,522 Thanks
    molerat
    • #9
    • 20th Oct 17, 7:09 PM
    • #9
    • 20th Oct 17, 7:09 PM
    Yours and OP's scenarios are different. If you are not working in the first part of the year then your monthly 1/12th allowance is added together until you do reach that threshold but OP thought that even when you worked from the beginning of the tax year you did not pay any tax until you had earned in excess of the total annual tax allowance which of course is totally incorrect and AFAIAA has never been the case..
    www.helpforheroes.org.uk/donations.html
    • chrisbur
    • By chrisbur 20th Oct 17, 7:12 PM
    • 2,794 Posts
    • 1,511 Thanks
    chrisbur
    Sorry to drag up an old thread, but actually what the OP said does hold true when you start being paid - I have just started getting my occupational pension after 7 years of no income, and I have been advised that I won't start paying tax until my allowance is used up. Rather annoying as I'd prefer it to be spread over the 10 months but apparently they cannot do that.

    Of course, this is only for the first year when you start receiving the income part way through the year, from April next year my tax will be spread evenly throughout the year. It was just that when I first read the OP I had a vague idea that happened to me in 1976 when I first started work but I decided things obviously changed since then when further posts were so scathing!
    Originally posted by GillM
    Not sure if you were advised wrongly or if you mis-understood. You get your tax allowance in equal stages over the tax year, so in moth 1 you get the first twelfth month two the second twelfth month 3 the third etc until month 12 you get the last twelfth.
    Now say you start getting paid in month 3 that means at that point you have 1 months pay and 3 months tax allowance, in month 4 you have 2 months pay and 4 months tax allowance, month 5 you have 3 months pay and 5 months tax allowance. So long as your total pay at any month is lower than your tax allowance no tax is due but at some point your total pay may well be greater than your tax allowance.

    Lets say in month 7 the total of your pay is £7200 and your tax allowance is £7000 you pay tax on the £200 which is £40.
    The following month your earnings are now £8640 and your allowance is £8000 so then you pay tax on £640 less the tax you paid on the £200 last month which is £128 -£40 = £88
    Following month earnings are £10080 allowance is £9000 so tax due on £1080 less tax already paid so £216 -£88 - £40 = £88
    If earnings remain the same this then continues with £88 tax due each month until the tax year ends.

    So tax starts not when you allowance is used up but when your earnings are greater than that part of your tax allowance that you are entitled to at that point in the year.
    • 00ec25
    • By 00ec25 20th Oct 17, 7:23 PM
    • 5,384 Posts
    • 4,734 Thanks
    00ec25
    Sorry to drag up an old thread, but actually what the OP said does hold true when you start being paid - I have just started getting my occupational pension after 7 years of no income, and I have been advised that I won't start paying tax until my allowance is used up. Rather annoying as I'd prefer it to be spread over the 10 months but apparently they cannot do that.

    Of course, this is only for the first year when you start receiving the income part way through the year, from April next year my tax will be spread evenly throughout the year. It was just that when I first read the OP I had a vague idea that happened to me in 1976 when I first started work but I decided things obviously changed since then when further posts were so scathing!
    Originally posted by GillM
    why have you dragged up an old thread merely to make the point that your scenario is, as you identify, a result of you having no income for the start of the tax year and therefore the point at which you start to pay tax is exactly as explained, the point at which your cumulative allowances exceed your cumulative income.

    For someone paid every week or every month that will be from week 1 / month 1 - provided they earn enough money to exceed the allowance . For someone who has no income for part of the year then obviously there will be a delay whilst the cumulative income "catches up" with the cumulative allowances.

    so what is your actual question that prompted you to drag up an old thread rather than starting a new thread of your own?
    • chrisbur
    • By chrisbur 21st Oct 17, 9:28 AM
    • 2,794 Posts
    • 1,511 Thanks
    chrisbur

    so what is your actual question that prompted you to drag up an old thread rather than starting a new thread of your own?
    Originally posted by 00ec25
    I do not think that the OP had a question; they believed that their experience of PAYE was the same as the original OPs and were I think posting to support what they had said. Something which as I understand it we are all free to do on an open forum.
    This in fact was not quite the same as the situation referred to originally and both were based on a mistaken idea of how PAYE works, though one that is held by many people so I felt it worth clarifying. Hopefully the posts by molerat and myself have clarified this.
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