Calculating tax under PAYE

village_life

Hi

can someone help me understand how PAYE tax is worked out.

Take for example my wife, who this month (august) has started a job paying £20k per annum. assuming she has not worked since April this year (99% accurate), how will her tax be calculated? - Will she get any "benefit" for starting work 1/3 of the way into the year, i.e. will her personal allowance go further and allow her monthly tax this year to be less than next year (i.e. 1/8 as opposed to 1/12)

a few months ago I switched jobs and I managed (somehow) to work out my own tax profile, but I cant get my head around it for her......

thanks in advance

Lokolo

Assuming she gets paid monthly she will have 12x£562 allowance. As she is starting 5 months into the tax year, she will get 5x£562 allowance in her first month, although this is £2810, so is likely go proceed also to the next month. After that she will get £562 tax free allowance each month afterwards. The first 3 months will be odd amounts.

village_life

Lokolo wrote: »

Assuming she gets paid monthly she will have 12x£562 allowance. As she is starting 5 months into the tax year, she will get 5x£562 allowance in her first month, although this is £2810, so is likely go proceed also to the next month. After that she will get £562 tax free allowance each month afterwards. The first 3 months will be odd amounts.

thanks for that, so given that her gross wage per month (Steady state) is 20000/12 = £1666.66 does that mean that in (her) month 1 she wouldnt pay any tax?, and would only start to pay a small proportion of tax in (her) month 2 once shes earnt 2*1666.66 and so broken through the £2810 threshold?

Lokolo

village_life wrote: »

thanks for that, so given that her gross wage per month (Steady state) is 20000/12 = £1666.66 does that mean that in (her) month 1 she wouldnt pay any tax?, and would only start to pay a small proportion of tax in (her) month 2 once shes earnt 2*1666.66 and so broken through the £2810 threshold?

Thats what I think!

village_life

Lokolo wrote: »

Thats what I think!

OK lets wait and see :-), your view is slightly different to mine, what I think will happen is that given we're midway through the year, a calculation will be made on how much she is due to earn until the end of the tax year, i.e. 8*1666.66, and from that she'll get an "annual" salary (for this year) and the tax due to that "annual salary" (£13,333) will be calculated and apportioned over each of the 8 months.....

will await a more definitive view

Lokolo

Haha yes, theres someone called CLAPTON who knows more than me about this so she might come along.....

CLAPTON

in her first month she earns gross 1,666 and her tax free allowance is 2,678 for the year to date (5 months) so no tax but she will pay NI
in her second month her pay to date will be 3,332 and her tax allowaance (year to date) will be 3,237 so she will pay tax on £95 i.e. 19 in tax and again she will pay NI

however, this depends upon her employers allocating the correct tax code (presumably she filled in a P46 when she joined)

molerat

Assuming a tax code of 647L she has a monthly allowance of £540 which will be used as stated above. She may be put on an emergency code of 647M for the first month or so depending on what documents she gives the employer so will only have the £540 allowance that month until the tax office sort it out. Did she give them a P45 or fill in a P46?

village_life

molerat wrote: »

Assuming a tax code of 647L she has a monthly allowance of £540 which will be used as stated above. She may be put on an emergency code of 647M for the first month or so depending on what documents she gives the employer so will only have the £540 allowance that month until the tax office sort it out. Did she give them a P45 or fill in a P46?

apparantly she filled in a P46 but her pay this month was lower than anticipated (she only started on 9th August, and her salary was therefore paid today for 9th august to 30th August) but it was less than anticipated. Maybe emergency tax was the answer? annoyingly we dont get her payslip till 25th so yet to be seen....

chrisbur

village_life wrote: »

apparantly she filled in a P46 but her pay this month was lower than anticipated (she only started on 9th August, and her salary was therefore paid today for 9th august to 30th August) but it was less than anticipated. Maybe emergency tax was the answer? annoyingly we dont get her payslip till 25th so yet to be seen....

Did your wife choose option A or B on the P46....

A – This is my first job since last 6 April and
I have not been receiving taxable Jobseeker's
Allowance, Employment and Support Allowance
or taxable Incapacity Benefit or a state or
occupational pension.
OR
B – This is now my only job, but since last 6 April
I have had another job, or have received
taxable Jobseeker's Allowance,
Employment and Support Allowance or
taxable Incapacity Benefit. I do not receive

a state or occupational pension.

In your first post you said "assuming she has not worked since April this year (99% accurate), "

village_life

chrisbur wrote: »

Did your wife choose option A or B on the P46....

A – This is my first job since last 6 April and
I have not been receiving taxable Jobseeker's
Allowance, Employment and Support Allowance
or taxable Incapacity Benefit or a state or
occupational pension.
OR
B – This is now my only job, but since last 6 April
I have had another job, or have received
taxable Jobseeker's Allowance,
Employment and Support Allowance or
taxable Incapacity Benefit. I do not receive

a state or occupational pension.

In your first post you said "assuming she has not worked since April this year (99% accurate), "

I presume she ticked box B (though I made my comment for the purposes of a clear cut explanation :-)).... She has been doing a PHD course which is paid tax free, and with that shes done some additional demonstrating which is taxable income, but has only earnt a couple of hundred pounds so far for that this year..... therefore I just wanted to take it out of the equation while I get my head around the basics of how tax is calculated