eligible for lower tax rate/ tax rebate after claiming JSA

qwerty42

Hi there,

Wondering if you can help with a quick query I have.

I was unemployed and claiming JSA from the middle of March until August 3rd 2009, I received £864 in total benefits over those 4 1/2 months; essentially £50 a week.

How will this affect the tax that I will now pay given that I was earning below the threshold each month of £500 for those 4 months?

My currently salary is £20240 or roughly £1686 a month prior to tax and student loan deductions.

Apologies if this seems like a fishing expedition, only it was one my colleagues who mentioned it to me and I thought I might see if anyone had any experience of being entitled to a lower rate of tax for the first few months etc

Thanks in advance

Pumpkinface_2

Yes, you will benefit unil the end of the tax year because you will still have unused much of your personal allowance and now it can be split over 8 months rather than 12. It is not a lower tax rate per se.

I would estimate that you will be about £30 per month better off than somebody on the same salary as you that worked the whole year.

qwerty42

Thanks for the speedy reply.
So would I see this as just an extra amount on my salary each month or would it come as lump sum at the end of the fiscal year?
Cheers

trevormax

You would see this as paying less tax each month, approx £30 as Pumpkinface has said, so your net salary (after tax and NI are taken off) is about £30 more.

qwerty42

Thanks for the advice so far guys, I’ve just received conflicting advice from a member of my HR department who has informed me that due to the fact I’m on a cumulative tax code I won’t pay tax for the first month or two until my allowances are used up, is he wrong?!

Not trying to say either of you are wrong I'm just a bit confused now

fengirl_2

As your JSA is way below the tax threshold, you will have unused allowances from 6 April to August, so it is possible you wont pay tax for the first month or two until you use these up.

Pumpkinface_2

qwerty42 wrote: »

Thanks for the advice so far guys, I’ve just received conflicting advice from a member of my HR department who has informed me that due to the fact I’m on a cumulative tax code I won’t pay tax for the first month or two until my allowances are used up, is he wrong?!

Not trying to say either of you are wrong I'm just a bit confused now

I think they would spread your unused allownces out over the rest of the year, personally I would be surprised if you pay nothing for a month or two. When's payday? Why not wait and see, it will all be the same in the end.

suso

You won't pay for a couple of months if you are on a cummulative code, while all of your unused allowances are being used up. (I've not got my tax tables handy or know your tax code, so can't predict when you'll start to pay.)

qwerty42

thanks for the reply, I was on tax code BR for the first two weeks of employment but having submitted my p45 from JSA I've subsequently been changed to 647L if that helps!

suso

Are you paid weekly or monthly.

If weekly and the code BR has been used then you will have overpaid tax. this will now be refunded as you are on a cummulative code.

If monthly the only code that counts is the code used on the payroll processing day.

Lots of presumptions here, but here goes, you are paid monthly and they are using 647L on your 1st payday and you are paid at the end of the month.

Paid at end of August - you would have been allowed to earn 2699 before paying tax, you have earnt approx 2532 (846 JSA + 1 month wage 1686)
So no tax is due.

Paid At end of September - you would have been allowed to earn 3239 before paying tax, you have earnt approx 4218 (846 JSA + 2 month wage 3372)
Tax due is 4218 minus 3239 = 978 * 20% = 195.00

Paid at end of October - you would have been allowed to earn 3779 before paying tax, you have earnt approx 5904 (846 JSA + 3 month wage 5058)
Tax due is 5904 minus 3779 = 2124 * 20% = 424 (minus 195 already paid = £ 229)

for that point onwards you would be paying approx 229 tax each month. (could vary because of pension contributions etc.)

qwerty42

can't thank you enough for working all that out for me!

I'm paid monthly although being a new starter I got a mid monthly advance of half of my salary paid last Friday but with tax code BR so it worked out at £542 and not a true half.

So now my tax code has been changed I'm hoping the end of month payday should reflect the over payment of tax for the first half of the month and indeed not be on the rest of it?

Or have I got that wrong

Thanks again