Am I being taxed too much???

jonnywoods

Hello there. Can somebody with a bit of tax knowledge please give me som advice here, because no matter how hard I try I cannot get my head around it!!

I was away travelling for the early part of 2009, so did not start employment this tax year until August. I was on an emergency tax code originally and was paying huge tax. I am now on code of 647L which I believe means I can earn up to £6,470 before I start paying tax?? Is that right?

Anyway, I have so far earned only £1,236 this tax year, and have paid £172.20 in tax. I also have the following on my pay slip: ER'S NI TO DATE: £73.72, EE'S NI TO DATE: £63.36.

Can anybody tell me if I have over-paid please, and if and how I get a rebate. Just some basics on tax would be great too, like explaining the 647L tax code. Thank you.

Lokolo

647L is the basic tax code for most people.

This means you can earn £6,475 before paying tax.

However, it doesn't work the way you are thinking it works.

The allowance is split over the number of times you get paid.

If you get paid monthly, this means you have a monthly allowance of £539.58 (6475 / 12). Anything over this you will be taxed each month. I assume you earn over this each month, hence why you have paid tax.

It basically assumes you are working for the rest of the tax year. If you stop, you will get a refund in your last paypacket (well should) if you are owed any tax.

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NI. This is National Insurance. This is based on weekly earnings, so if you earn over £100 (something like this) a week you pay 11% of whatever is over. You cannot reclaim this. It is not the same as normal income tax.

EE/ER - something like employees and employers or whatever. Both you and the company pay some NI.

jonnywoods

Thank you for the explanation. So have I currently paid the correct amount of tax or would I be due some back? Just seems like I've paid a lot. You say it "assumes I will be working for the rest of the tax year" but does it also assume that I have been working for the entire tax year so far ie since April (when in fact Ive been working since August) ??

trevormax

Just a guess but are you paid weekly? and am I correct in saying this is the 6th wage you have had from this job?

If you are on code 647L then you have been put onto a cumulative tax code and over the next week or two, you should automatically get a refund of the overpaid tax.

EE = employee contributions
ER = employer contributions

The primary threshold (point at which you start to pay NI) is £110 per week this year and is 11% of anything over the threshold. I think Lokolo is correct in saying that you will not get this money back.

Edit - forgot to ask, did you have any taxable benefits before you started work such as JSA? You are due some (or more likely all) of the tax back but this will depend on if you have had any other taxable income this tax year.

Rolo_Tomasi

On your figures it does seem that you have paid too much tax to me.

We are now half way through the tax year and as the previous poster has stated you can earn up to £3237 before you pay tax. I assume that you are being taxed on a week 1/month 1 basis - check your payslip is there a w1/m1 or 'x' after the tax code? If there is then you need to contact your tax office and ask them why you have this tax code. It is probably because they do not know if you had any earnings earlier in the tax year and a quick letter of explanation will result in a 'normal' code being issued.

If this is sorted out before the end of the tax year, any overpaid tax will be refunded through your wages. If it goes beyond 5 April 2010 then you will have to reclaim a refund direct from the tax office.

Lokolo

You have overpaid thus far (most probably because of BR at first), but it should sort itself out next month as it looks at months you haven't had the tax allowance.

If it hasn't talk to HR and ask them when it will be paid back.

If you end up having overpaid by April you can contact HMRC and get a refund from them.

jonnywoods

Thanks for the swift responses everyone... impressive!!

I am paid weekly and yes I have received 6 pay packets... very well deduced. The only benefit I received was JSA and they gave me a fantastic sum of £27.56. This is a very sore point and I am currently claiming a further £55 ish from the Jobcentre.

There is no w1/m1 or 'x' after my tax code.

So do I just have to sit tight and wait for the money through my wages? Will they simply charge me a very small amount of tax until it evens itself out or will I get a lump sum?

Lokolo

jonnywoods wrote: »

Thanks for the swift responses everyone... impressive!!

I am paid weekly and yes I have received 6 pay packets... very well deduced. The only benefit I received was JSA and they gave me a fantastic sum of £27.56. This is a very sore point and I am currently claiming a further £55 ish from the Jobcentre.

There is no w1/m1 or 'x' after my tax code.

So do I just have to sit tight and wait for the money through my wages? Will they simply charge me a very small amount of tax until it evens itself out or will I get a lump sum?

Yep thats what should happen.

So instead of paying say £50 in tax a week, you pay £50, but then get a refund of £10, so end up only paying £40.

http://listentotaxman.com/

If you go here and enter the info, it tells you how much you should be paying

trevormax

As long as your payrol people do their job propperly and apply a cumulative code, you should get it all back in the first wage after they have applied the code.

Normally, you should pay about £16 tax per week, but due to you having so much unused personal allowance, you should not have to pay tax until a couple weeks before the end of the tax year (assuming your wages do not increase or decrease).

jonnywoods

I would think its fair to say our payroll people DO NOT know what they are doing!!

Thanks for your help. I will expect to get screwed whatever happens but maybe I'll at least pay lower tax for the rest of the year.

chrisbur

jonnywoods wrote: »

I would think its fair to say our payroll people DO NOT know what they are doing!!

Thanks for your help. I will expect to get screwed whatever happens but maybe I'll at least pay lower tax for the rest of the year.

Did you give your new employer a P45 or fill in a P46? These forms are how the tax office find out where you are working so that they can issue your employer with an up to date tax code along with previous pay and tax details. Untill your employer has these details you may not be paying the correct tax.