Understanding a Tax Problem

burns863

Hi Guys,

I'm hoping someone can help me out here. I changed jobs in September. My last day of employment at one job was September 11th 09 and I started my new job on September 14th 2009.

My P45 took ages to come (I am unsure why), maybe the postal strike was partly to blame. Anyways... I gave my P45 in to the company secretary last week, which has now been processed.

Today I have been paid, but have unfortunately been taxed fairly heavily. I can't make sense of it all, because despite having only just had my P45 processed, I have actually been on the correct tax code since day 1 at my new job. To clarify, when I started my new job they put me on 647L even though they didn't have my P45. This was the same code as I was on at my previous job and is the same code I am on now that my P45 has been processed.

The company secretary got in touch with the company accountants to try and gather some more information for me. She appears to give a definite reason to why I have been taxed more this month, but I don't understand it.

I hope that someone can help! Here is the accountants reply....

"In relation to the query re: [name removed] salary deductions:
We have received his P45 this month which has now been entered onto the system with his previous pay and tax details. As he left his previous employment part way through September and had already used his allowances, when he started his new job he has used the same months allowances again which is why it is now correcting itself this month."

alwaysonthego_2

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chrisbur

The code that you were on when you started your new job would have been an emergency tax code which would have been used I would assume as a result of you either filling in a P46 or some form used by your new employer to get the details needed to do an online P46. This would be that you confirmed that this was your only job and that you had worked elsewhere before starting with them, and you do not get any pensions.

The emergency code is 647L which in your case would be applied on a month 1 basis. This means that you would get about £540 of your first wage tax free and tax would be deducted on the rest.

Your old employer was using your code of 647L which meant that each month they were allowing you about £540 before tax was deducted.

What has happened is that for at least one month possibly more there has been an overlap where both your old employer and your new employer have been giving you a tax allowance of about £540. So for each month this has happened you have underpaid £108 tax assuming that you are not a higher rate tax payer.

To check for this, have a look at the month number on your P45 and compare it to the month number on your payslips to see the overlap eg. if P45 has month 7 and your first payslip is for month 6 then they overlap by one month and tax would be under-deducted by £108 (assuming on 20%).

It is often assumed that being on emergency tax will result in paying to much tax, occasionally that is correct, usually you pay about the right amount, sometimes as you have discovered you do not pay enough.

Now that your P45 has been added to your pay details and the underpaid tax taken the amount you pay next month should be back to normal.

burns863

chrisbur wrote: »

The code that you were on when you started your new job would have been an emergency tax code which would have been used I would assume as a result of you either filling in a P46 or some form used by your new employer to get the details needed to do an online P46. This would be that you confirmed that this was your only job and that you had worked elsewhere before starting with them, and you do not get any pensions.

The emergency code is 647L which in your case would be applied on a month 1 basis. This means that you would get about £540 of your first wage tax free and tax would be deducted on the rest.

Your old employer was using your code of 647L which meant that each month they were allowing you about £540 before tax was deducted.

What has happened is that for at least one month possibly more there has been an overlap where both your old employer and your new employer have been giving you a tax allowance of about £540. So for each month this has happened you have underpaid £108 tax assuming that you are not a higher rate tax payer.

To check for this, have a look at the month number on your P45 and compare it to the month number on your payslips to see the overlap eg. if P45 has month 7 and your first payslip is for month 6 then they overlap by one month and tax would be under-deducted by £108 (assuming on 20%).

It is often assumed that being on emergency tax will result in paying to much tax, occasionally that is correct, usually you pay about the right amount, sometimes as you have discovered you do not pay enough.

Now that your P45 has been added to your pay details and the underpaid tax taken the amount you pay next month should be back to normal.

Thanks for your reply

Since starting this thread, a friend of mine explained it to me in simple terms but I think he was saying the same thing as you.

Basically, because during my first 2 months my P45 hadn't been processed, when I got paid my final wage from job 1 it fell in the same month (september) as the first wage from my new job (job 2). Because my P45 hadn't been processed my new employer didn't know how much tax allowance I had used that month and presumed I still had my £540 allowance. Now that my P45 has been processed it has been seen that I have effectively "gipped" the tax man by having 2 wages in one month each with £540 tax free. Now they've took what I owe them from September and I should be straight with them.

Am I understanding this correctly?

burns863

Just to add... I have not had to complete a P46 since starting my new job. I seemed to be just automatically put on 647L despite not having my P45 right away.

chrisbur

Yes you do understand correctly. As far as the P46 is concerned if your new employer does the P46s online then they only have to ask you the questions they then fill in the form on your behalf.