Understanding P60s

elicatdun

Just a quick question re P60s. Could someone please explain the relevance of the three National Insurance columns to me:

1. Earnings above the Lower Earnings Limit (LEL), upto and including the ET
2. Earnings above the LEL, upto and including the Earnings Threshold (ET)
3. Earnings above the ET, upto and including the Upper Earnings Limit(UEL).

Also, I am trying to work out whether I need to pay any additional tax. I have no other income and therefore it's my only wage. I had assumed all the tax calculations were done automatically via PAYE each month. Is this right or do I need to do anything additional? If you creep into the higher tax bracket, does this happen automatically on PAYE?

Many thanks in advance.

CLAPTON

if you earn more than the ET (110 per week) then you pay NI

if you earn between the LEL (95 per week) and the ET (110 per week) you don't actually pay any NI but you are 'credited' as if you did.

you pay standard rate NI (i.e. 11% or 9.4% if contracted out) on earning between the LEL 110 per week and the UEL (844 per week) and 1% thereafter.

if you are a 'normal' paye payer (one job only, normal tax code ) then your income tax and NI will be corrrect whatever your earning
If you creep into 40% then your PAYE will be OK but you may owe tax if you have savings or dividend income

Any

Clearly theoreticaly all the tax is deducted through PAYE system.
In real life there are times when this doesn't happend all that accurately.
For example - you change your job. Let's say you don't work for 2 months and then you find new job. But you don't have P45 and don't really know much about them. Then the payroll puts you on a tax code they think is best and let you complete P46 - employee without P45. Before this all is processed, beginning of April comes and new tax year starts - at this case you would be entitled your monthly tax free personal allowance from the 2 months you weren't working. But thanks to the timings this didn't happen automaticaly through PAYE.
And there are other cases that affects tax issues just like this one.

To help you understand your tax - tell me, what is your tax code? Are you regular employee with no benefits in kind? That means no private medical, no car etc...?

00ec25

Any wrote: »

Then the payroll puts you on a tax code they think is best

? Any competent payroll clerk should know that the only option is to put you on week 1 or month 1 (weekly paid or montly paid) tax code and signify this as the "emergency" code using the suffix T

00ec25

elicatdun wrote: »

I have no other income and therefore it's my only wage. If you creep into the higher tax bracket, does this happen automatically on PAYE?

if you are worried about higher rate tax band then surely you must ???? have some other income. Are you saying that you do not have even 1 penny from interest on savings or cash at the bank, no dividends etc?

Once your total income (including "unearned" items such as above) goes over the 40% threshold, the onus is on you as the taxpayer to inform your tax office of that fact. HMRC does not automatically send you a self assessment return anymore.

Depending on how complex your affairs are, they may get you to do a self assessment or they may just ask for a simple statement of total income. Then most likely outcome is they adjust your tax code to recover the tax due on your other income (less likely they might send you a bill)

Any

00ec25 wrote: »

? Any competent payroll clerk should know that the only option is to put you on week 1 or month 1 (weekly paid or montly paid) tax code and signify this as the "emergency" code using the suffix T

No actually, any competent payroll clerk ask you few questions and put you on BR when you are still due any payment from your old employer...
I didn't want to point out only one option because then everyone who doesn't understand tax codes and payroll etc would jump on the case and think that they are wrongly taxed even though their case is different...

By saying "what they think best" I didn't mean they make it up, but that they assess the situation accordingly.