Tax advice - Queries on income tax & NI

Samfau

Hi, im currently on my gap year and working in a local supermarket to earn some money for university/travel.

I'd appreciate it if someone could help me out with a few queries i have about the tax that i am paying.

First off, i have just received my second paycheck. (Haven't actually got the slip yet as im not working again until friday, but have seen the money go into my account).

My first paycheck was just for my 2 training days and totalled around £100. I did not pay any tax on this and had nothing deducted from the paycheck at all. I then received a P45 soon after which i gave to my employer to prevent me from paying tax at an emergency rate. Now, i've just received my second paycheck, i was expecting around £700 and can see that tax has been deducted at 22% from the amount that appears in my account.

So my first question is. I know that i will not earn more than £6,035 (the untaxable personal allowance) before the end of the tax year in april, so do i need to pay tax at all? Is there any way i can prevent tax being deducted from my paycheck in the first place so that i can put the money into a savings account for example? Or do i have to claim it all back in april by showing i did not earn enough to be taxed? I'd much prefer to have the money now as it could go into a savings account ready for when i start university and save me the hassle of claiming everything back.

My second Q is, why did i not pay any tax on my first paycheck, will i need to pay this now that i have given in my P45?

And finally, how do i work out how much national insurance i will be paying? Is there a similar system to income tax in which you do not pay any until you are earning up to a certain amount?

Any help on this would be really useful. Thanks in advance.

CLAPTON

where did the P45 come from??

what is your tax code?

what have you been doing, income wise since april 2008?

tinkerbell84

Samfau wrote: »

My first paycheck was just for my 2 training days and totalled around £100. I did not pay any tax on this and had nothing deducted from the paycheck at all.

Presuming you are paid monthly, you can earn £6035/12 (£500ish) a month without paying tax. As you only earned £100 that month, you didn't pay tax or NI.

Samfau wrote: »

I then received a P45 soon after which i gave to my employer to prevent me from paying tax at an emergency rate. Now, i've just received my second paycheck, i was expecting around £700 and can see that tax has been deducted at 22% from the amount that appears in my account.

can't tell what's happened if you haven't got your payslip yet. you may have been too late handing in your p45 for them to apply the right tax code this month. you will also have paid NI, so it's not all tax

Samfau wrote: »

So my first question is. I know that i will not earn more than £6,035 (the untaxable personal allowance) before the end of the tax year in april, so do i need to pay tax at all? Is there any way i can prevent tax being deducted from my paycheck in the first place so that i can put the money into a savings account for example?

No. If you earn more than £500 per month you must pay tax. You can claim it back when you get your P60 at the end of the financial year.

Samfau wrote: »

Or do i have to claim it all back in april by showing i did not earn enough to be taxed? I'd much prefer to have the money now as it could go into a savings account ready for when i start university and save me the hassle of claiming everything back.

Doesn't work like that else everyone would do it.

Samfau wrote: »

My second Q is, why did i not pay any tax on my first paycheck, will i need to pay this now that i have given in my P45?

Answered above.

Samfau wrote: »

And finally, how do i work out how much national insurance i will be paying? Is there a similar system to income tax in which you do not pay any until you are earning up to a certain amount?

You pay NI on earnings over £105 per week. If you're paid monthly that's £455 per month before you pay NI at 11%.

Samfau wrote: »

Any help on this would be really useful. Thanks in advance.

These questions come up time and time again. there's a useful search function at the top of the forum

johnllew

tinkerbell84 wrote: »

No. If you earn more than £500 per month you must pay tax.

It depends on the earnings prior to taking up the new employment. If the correct code is applied on a cumulative basis and, taking into account the previous employment, total earnings for the tax year do not exceed £6035, then the PAYE system will mean that all tax deducted will be refunded automatically by the 5th April 2009.

Samfau

Thanks for the responses, thats cleared a few things up.

I received my P45 through the post from revenue and customs, i didnt pay much attention to it as it just said at the top "For your employer", so i am unsure what my tax code is or if i even have one as of yet. Since april 2008 i have been a student at sixth form college and not been employed.

And just to clarify. I should only pay tax on anything over the £500ish a month at 22% and pay 11% NI on anything over £105 each week. So the personal allowance is already factored into this.

I think it is probably the case that my P45 has not been applied yet even though i gave it in almost a month ago. I will bring this up with the personnel department and try and sort that out. Things should be a bit clearer when i receive my payslip too.

Thanks again

CLAPTON

Samfau wrote: »

Thanks for the responses, thats cleared a few things up.

I received my P45 through the post from revenue and customs, i didnt pay much attention to it as it just said at the top "For your employer", so i am unsure what my tax code is or if i even have one as of yet. Since april 2008 i have been a student at sixth form college and not been employed.

And just to clarify. I should only pay tax on anything over the £500ish a month at 22% and pay 11% NI on anything over £105 each week. So the personal allowance is already factored into this.

I think it is probably the case that my P45 has not been applied yet even though i gave it in almost a month ago. I will bring this up with the personnel department and try and sort that out. Things should be a bit clearer when i receive my payslip too.

Thanks again

basically no


Lesson one....always keep copies of any official document especially anything to do with tax or pay... are you sure it was a P45 .. that is a multipart document with a copy to keep for yourself.

your tax code will be on your payslip... what did your first payslip say. (make sure you keep it in a safe place.)


No you don't pay tax on amounts over 500... that would be true if you had earned the same income each month since april but not in your case.

It works like this

you can earn 6035 per annum before tax is due... this correspondance to a tax code of 603L (withour anything like Wk1 or M1 after it)

the 6035 is allocated on a monthly basis ... i.e. about 502 per month
as you haven't had any income since april you are entitled to about
502 x 9 (months) worth of allowances i.e. 4,526 before any tax is due....
so you should pay NO tax this tax year.

However to get this allowance your tax code should be 603L

then the tax rate is 20% (22% was last years rate)
and NI at 11% on anything above 105 per week or 453 per month

McKneff

As far as i am aware you dont just pay NI on anything over £105, if you earn over this you pay NI on the whole lot
but i'm quite happy to be corrected if i'm wrong

CLAPTON

anniehanlon wrote: »

As far as i am aware you dont just pay NI on anything over £105, if you earn over this you pay NI on the whole lot
but i'm quite happy to be corrected if i'm wrong

you are indeed incorrect

if you earn say 106 per week then you pay 11% of £1 i.e. 11p

Samfau

I have the p45 here (the part that i am supposed to keep). It does indeed say my tax code is 603L, whereas the taxcode on my first payslip is 609L WK1, which i receieved before the p45. I have only been working since the beginning of december, so do I only get months december to april of untaxable allowance?

Again, thanks for you help.

relaxtwotribes

No. The £6035 allowance is for the whole year. It is allocated across your pay periods, which if they are monthly will be £502 per month. But as you didn't work until December you had lots of allowance to use up before you start to pay tax. See Clapton's last but one reply especially the paragraph starting "the 6035 is allocated on a monthly basis"

Samfau

good thats what i presumed was the case but was just clarifying.

When Clapton said im entitled to 9 months of allowance that confused me a little, but i see that is from last april to now yes?

I think most of it sussed now, may need to check a few things when i get my payslip (hopefully tomorrow) but its a lot clearer. Although, could someone explain to me the difference between the two tax codes i have seen? Or point me in the direction of a tax code guide explaining what they mean. merci