First income this tax year. Am I paying correct tax?

marcofoo

Hi.

I've just received my first pay cheque of the year. Details as follows:

Salary: £23000 (going up to £24000 after 3 months).
Start date: 9 Nov 09
This month's pay before tax etc: £1415.39
Tax paid: £175.00

I should earn the folling before April:

Nov: £1415
Dec: £1916
Jan: £1916
Feb: £1972 (approx.)
Mar: £2000
Total: £9219

It is my understanding that I should begin paying tax after I have earned £6475. So why have I paid £175 in tax this month? If incorrect, what should I do?

Thanks.

fengirl_2

No, you dont begin paying tax after you have eanred £6475 - otherwise you would have a very poor cash flow! However you do have a monthly tax free amount of £540 which goes back to April this year. Your employer has you on emergency code. You now need to contact your tax office and tell them what you were doing between April and Nov and ask them to issue a code to your employer.

Sharon87

Actually I've calculated it and £175 is right for the amount you earn. After taking away your tax free allowance it's 20% of your earnings.

Tax free portion: £589.38
Tak paying portion: 875.81 - 20% on this is £175.16

So everything is fine.

You can also check the amount of tax you should be paying on listentotaxman.com

chrisbur

You are almost certainly on emergency tax, what your tax should be at the moment I cannot say without knowing what taxable income or benefit you have received before starting this job. Did you fill in a P46 and if so which box did you choose A or B?
Do not bother with listentotaxnan.com as if you use this to work out a monthly figure it uses the tax code on a month 1 basis which if you have little or no earnings so far this year will give the wrong answer for you.

Happy_Girl_2

On a 647L tax code, you get £540 per MONTH of tax free pay. If you haven't worked since April, you should not be paying tax until you have earned more than the sum of tax free monthly amounts

In Nov, that figure would be £540 x 8 = £4,320
In Dec £540 x 9 £4,860 etc etc

Your employer likely has you on code 647L M1 (check your payslip - does it say this or 647L X in the tax code box?) which is a non cumulative code. Essentially that code means it ignores all earnings for the previous months, and taxes 20% of all earnings above the tax free amount £540 in 09/10)

This is the emergency tax code, and has been applied correctly if you have not given them a P45 or P46 with box A ticked. Once you do give them either the P45 or P46, the tax will automatically correct itself within the payroll system and trigger a rebate of overpaid tax to date, which will be paid with your salary

fengirl_2

The OP has not said this is his/her first job EVER - box A may not be appropriate. As S/he is on e code, they have clearly ticked box B and so need to speak to HMRC to get a code issued.

marcofoo

Ok so I contacted the tax office and they said I need to give my new employer parts 2 and 3 (I think) of my P45 from previous employer. I did that on the 11th Nov, so maybe there's a chance it hasn't yet been processed.

Chrisbur, the only benefits I have had this year is NI contributions. I have not been eligible for anything other than this.

Happy Girl, my tax code is 647L1.

I don't remember what box I ticked but no queries were thrown up by my employer.

chrisbur

marcofoo wrote: »

Ok so I contacted the tax office and they said I need to give my new employer parts 2 and 3 (I think) of my P45 from previous employer. I did that on the 11th Nov, so maybe there's a chance it hasn't yet been processed.

Chrisbur, the only benefits I have had this year is NI contributions. I have not been eligible for anything other than this.

Happy Girl, my tax code is 647L1.

I don't remember what box I ticked but no queries were thrown up by my employer.

On the P45 was there an X in the box marked Week1 / Month1 at item 6?
Was the gross pay figure in item 7 or 8?
What was the date of leaving at item 4?
Who issued the P45?

Not sure what you mean by "only benefits I have had this year is NI contributions". Ni contributions are what you pay not a benefit.

marcofoo

chrisbur wrote: »

On the P45 was there an X in the box marked Week1 / Month1 at item 6?
Was the gross pay figure in item 7 or 8?
What was the date of leaving at item 4?
Who issued the P45?

Not sure what you mean by "only benefits I have had this year is NI contributions". Ni contributions are what you pay not a benefit.

I can't tell you anything about my P45 as I've given it to HR.

Re benefits: I was signing on at the job centre, but not receiving any benefits other than contributions towards my state pension.

chrisbur

marcofoo wrote: »

I can't tell you anything about my P45 as I've given it to HR.

Re benefits: I was signing on at the job centre, but not receiving any benefits other than contributions towards my state pension.

You should have kept the top copy of the P45, this should be returned to you by your employer at some time.
If your P45 had a code on it that was on a cumulative basis then as soon as your employer operates it your tax will be adjusted and from what you have said you will get back what you have paid.
If your P45 had a code on it that was on a week1/month1 basis then you will continue to be taxed as you have been, the tax office will be advised and they will eventually issue tax details to your employer and then your tax will be adjusted and any overpayment repaid to you.
Your tax will be sorted out it is just a matter of how long.
If you ask your payroll dept I am sure they would be able to tell you which code was on your P45 a cumulative or a week1/month1.
The above assumes that your P45 was issued this tax year, if it was last tax year then whatever the code it will be traeted as a week1/month1 code

marcofoo

chrisbur wrote: »

You should have kept the top copy of the P45, this should be returned to you by your employer at some time.
If your P45 had a code on it that was on a cumulative basis then as soon as your employer operates it your tax will be adjusted and from what you have said you will get back what you have paid.
If your P45 had a code on it that was on a week1/month1 basis then you will continue to be taxed as you have been, the tax office will be advised and they will eventually issue tax details to your employer and then your tax will be adjusted and any overpayment repaid to you.
Your tax will be sorted out it is just a matter of how long.
If you ask your payroll dept I am sure they would be able to tell you which code was on your P45 a cumulative or a week1/month1.
The above assumes that your P45 was issued this tax year, if it was last tax year then whatever the code it will be traeted as a week1/month1 code

My P45 would have been created in March 2009.