Taxed at 40% after job change and 45day break

darkvader

Hi,

Just got this month's payslip from my new employer and Im totally confused. I spent a good amount of time in Nov calculating how my taxes will look like but Im totally lost. Any clarity will be appreciated

I changed my jobs and left my old employment end of Nov 2010 and started with my new employer Jan 15th 2011.
In my old employment my total package was £36000 with a £3600 bonus which was paid to me. No other income and no pension. This was from April 2010 to Nov 2010
In my new employment, I have been given a sign on bonus of £3000 and my total package for the year is £52500. This is applicable from Jan 15th to April 6th 2011

I submitted my P45 on Jan 15th. My tax code says D0 M1 and I have paid 40% of my salary in taxes when it should be much lesser given I was jobless for 1.5 months. Is this just a case of tax adjustments over the next 2 months? Or is there something I must do to rectify this?

Many thanks
Darkvader

dori2o

Is the tax code on the P45 D0? Is this your only source of income, or do you have another source that is getting the benefit of your tax free allowance?

D0 is always operated on a month 1 basis never on a cumulative basis. this means it will only ever look at the salary you receive in any 1 pay period and deduct 40% from that. So if you have a break in employment and D0 is the code in operation, it will not take into account the break.

darkvader

The tax code on my P45 was 647L - the emergency one. I dont have any other source of income other than what I mentioned.

So if D0 looks at a 1 month basis only then does this imply my tax code is up for change next month? Clearly the 45 days without work must be accounted for somewhere so does this happen automatically now that I am on the D0 M1 code?

And Im pretty sure the sign on bonus I received pushed me up which again is a case of adjustments over the next 2 months. As I need an adjustment for the 45 day break as well as the inflated salary due to the sign on bonus, Im wondering if I must act on it or just wait it out till I get my P60

Darkvader

dori2o

Why are your employers using tax code D0? If you've handed in your P45 they should be operating the code that was on there. that would have brought you up to date and resolved the issued surrounding the days out of work and tax due on cumulative pay to date.

Unless HMRC have issued the D0 code they should not be operating it.

Mikeyorks

darkvader wrote: »

The tax code on my P45 was 647L - the emergency one.

It's only the emergency one if it has 'Month 1' following it. 647L is the basic code most of us have.

'D0' on the other hand instructs that all your income is taxable at 40%. So you really need to ascertain where that came from .... as it implies a 2nd job. A word with payroll first?

(Sorry - crossed in the post)

darkvader

Thanks for that - yes I will have a word with payroll first, just logged a case with them to sort this out.
I believe its possible they have not yet processed my P45 (may not have reached the before the cut off date??) which is why they have issued the D0 code.

Am I right in assuming that even if they did use D0 M1 this month, it will be corrected once they process my P45 OR am I being too simplistic in my views? The words Income Tax and Honesty do seem to be opposites at most times

Darkvader

Mikeyorks

I can't envisage the circumstance where your payroll would pluck 'D0' out of thin air ..... but they're the obvious port of call. Unless you've received a revised P2(Coding Notice) from HMRC .... which I think you would have mentioned.

Yes it should resolve if the P45 is processed correctly. But I still think the emergence of the 'D0' needs resolution

RAS

darkvader wrote: »

The tax code on my P45 was 647L - the emergency one.

This is the standard single person's allowance, not the emergency code.

chrisbur

Tax code 647L is the standard allowance and it is also the code used for the emergency code. When used as an emergency code it may be applied on a week1/month1 basis or on a cumulative basis depending on what the new employee completes on their P46.
As has been said when your P45 is applied any correction to tax will be made assuming your P45 had a cumulative code. Check the part that you kept, if cumulative it will not have an X in the box that follows the tax code and will have figures in section 7.
In my experiance monthly payrolls tend to have quite early cut off times so would not surprise me that your P45 missed it. Strictly speaking they should have used emergency code if P46 was completed or BR if not but wonder, and this is just a guess, if what with the bonus, fairly high salary, and the possibility of your P45 overlapping this new employment, they felt that this could well have resulted in under taxing you so played safe with the 40% code pending you P45 being used, to avoid you being hammered for tax when the P45 was used.

darkvader

Thanks Chris,

Checked out as suggested and
1. There is no X marked after the Tax Code in Section 6 to state if Week 1/Month 1
2. Section 7 does have figures for salary and tax paid till date including the Salary month

A lot more relieved now as it points to automatic tax correction, and hopefully lower tax in the next few months once the P45 is processed - hard to believe but its my first P45 as I left my previous company after almost 7 years

Cheerio
Darkvader

darkvader

And just to add a note that proves my ignorance, I rechecked the payslip as well as all the notations/sections and the Salary/Tax/NI paid till date only shows this months and hence new employment details - this clearly means they have not received/processed my P45 else this section should have detailed my previous pay/taxes/NI

Wednesdays always tend to have the max dumb moments for me - but thank you guys once again for giving a lot more info to help me and others in the future

DV