Calculating tax due up till now?

jem16

My son started his first proper job on October 2nd and handed in a P45 as he had been receiving a pesnion from his late father's scheme. On 15th October he received his first month's wages but was taxed at BR.

He has just been paid today using 508L which is the code on his P45 - he still has an extra allowance for clothes washing from his part-time job at Sainsbury's which he'll need to get removed now.

He's been paid far more this month - a ridiculous amount more, he said! - but it's due to a tax rebate. He's worried that it's wrong and they'll take it back off him. I think it's probably correct as he has 3 months unused allowance plus 3 months where he didn't use his full 10% band.

Is there a calculator somewhere that would work out how much tax he should have paid up till now?

Jake'sGran

You cannot have a tax refund if you have never paid tax so I am not sure what you are saying here. The way I remember it is, if he had started work at the beginning of the tax year and was paid monthly say, his tax free pay that month would be 1/12th of his tax free allowance and after this was deducted from the gross amount the tax would apply to the remainder. As he has started work relatively late in this tax year he will have about 6 months tax free pay to use up before the tax kicks in. His code seems a bit high but it is a long time since I did wages but if it includes some allowance pertaining to a previous employment he needs to advise the Revenue so that they can correct it. Otherwise the whole thing will become a mess.(You can check what his code should be on the IR web page or on teletext)

Sorry, just read over your post again. Does the tax allowance rate of 508L have something to do with the pension from his father? Actually, if he has income from a source other than his wages his tax allowance should in fact be reduced. There is some info missing here like, was he paying tax at Sainbury's? Even though he was part time he probably was paying tax in view of the income he was getting already? Hope I have not confused you but it is best to get it right at the beginning of his first proper job or the Inland Revenue will be chasing him for any rebate overpaid.

jem16

Sorry if my post was not clear so I shall clarify.

Normal personal code is 503L. My son has 508L.

He finished Sainsbury's in June 2005 so doesn't affect this tax year. He has asked the tax office to remove the extra allowance but they haven't done so, so need to phone again. I think they found it confusing as the allowance was attached to the tax code being used by the Pension company and not Sainsbury's. Sainsbury's paid him using BR code as a 2nd income. It was done this way as he didn't earn enough at Sainsbury's to make proper use of his allowances.

His tax code was being used against his pension from his father's scheme and this finished in June 2006 when he left university. They supplied a P45 which was passed onto his current employer.

In July, August & September he neither received a pension nor was working so he is due these allowances.

In October he started his first proper job. His 1st month's salary was paid using the BR code which meant he paid far too much. This month he has been paid using 508L as they have now taken the info from the P45.

I think I have manged to work out what tax will be due by the end of the tax year in April 2007. What he has paid so far plus what he will pay in the next 4 months should come to that amount so it seems that the tax rebate in this month's pay is correct. He may have to pay back some of his uniform allowance that he has been paid from June 2005 until now but that should only be about £11.

His next problem is to find out why his pay is not getting into his bank account on the due date.

Jake'sGran

I understand now. The IR may not bother about the £11. Re the late salary payments to his bank. This happened to my son and it really annoyed me as he was having a bad time then. If your son has DDs to pay I can only suggest he changes the dates so that his salary is always there before the money is due to come out. My son is 47 but I still try to advise him. Thing is, he always takes the credit when it comes out right:rolleyes:

jem16

Thanks for replying.

His salary turned up today although if it was like last month, it will have the correct date on it. Strangely enough he phoned the Halifax to see if there was ny pending payment and they told him nothing was there.

I've told him to let payroll know about the late arrival so it can be sorted out. At the moment we don't know if it's the bank or the company.

My son gets annoyed when I "advise" him but then always comes to me to get things fixed. :rolleyes: At times I feel I should just let him get into a mess but I can't.

Hoddie_2

Normal personal code is 503L. My son has 508L.

It's fairly easy to work out the tax due.

508L gives you a tax-free allowance of £5089. If your son is currently paid monthly, when he receives his 8th wage (payslip will/should show pay period 8 or M08, or similar) he will be entitled to 8/12ths of that 5089 and 8/12ths of his 10% and 22% rate bands.

Add up all his income to date, from the pension and all employers, regardless of what tax code has been used.

The first 3392.66 is tax free (5089 x 8/12)
The next 1433.33 is taxed at 10% (2150 x 8/12)
The next 20766.66 is taxed at 22% (31150 x 8/12)
Any remainder is taxed at 40%

Adjust the figures if you want to work it out from month 9, or use x/52ths if paid weekly (x/26ths if fortnightly or x/13ths if 4-weekly, etc).

I assume you think your son may owe £11 because he is still in receipt of the extra allowances. I'm guessing but your son may have been given £45 flat-rate expenses for when he worked for Sainsbury's - so long as he worked for them for at least one day since April 6th, the allowance is due in full. As has been said, HMRC won't chase for £11 so even if he hasn't worked for Sainbury's it won't cause a lot of problems, he should be safe to tell HMRC know after next April.

isasmurf

Hoddie wrote:

508L gives you a tax-free allowance of £5089.

Sorry to be pedantic, but 508L gives a tax free allowance of £5,085.

jem16

Hoddie,

Thanks for the figures but unfortunately they don't quite apply.

From April - June he was in receipt of the pension so his tax free allowance and part of his 10% band was used.

From July - September nothing was used so he's due those.

In October he started his 1st proper job.

He hasn't worked for Sainsbury's since April 6th so I suppose he's due to give back this year's allowance. We did let them know in June when we went to the tax enquiry office to sort out his rebate for last year but so far they haven't done anything yet. Possibly because he wasn't working up until now but it's probably better to let them know again anyway.

Hoddie_2

isasmurf wrote:

Sorry to be pedantic, but 508L gives a tax free allowance of £5,085.

No it doesn't. While the tax free allowance for the current year is 5,035, in practice a 503L code gives you an allowance of 5039. A 508L code gives an allowance of 5089.

The reason for this is that an employer would not know what number was replaced by the letter (it could be anything from 0 to 9), and so always use 9 so it works out to the advantage of the employee - as directed by HMRC.

Only if the person files a SA return or has an informal assessment raised will this slight discrepancy be picked up, otherwise they make a few extra pence at HMRC's expense.

By the way, in this thread, code 508L likely equates to PA 5035 + FRE 45, total 5080 not 5085.

Hoddie_2

Thanks for the figures but unfortunately they don't quite apply.

They do apply! If you add up the gross amount of pension received since April 6th, and add to that any employment income he's received since April 6th, you can work out exactly how much tax would be due on that income. Then you can compare this to what tax has actually been paid (by referring to payment slips) and see if there's likely to be a repayment due or underpayment.

jem16

Hoddie wrote:

They do apply! If you add up the gross amount of pension received since April 6th, and add to that any employment income he's received since April 6th, you can work out exactly how much tax would be due on that income. Then you can compare this to what tax has actually been paid (by referring to payment slips) and see if there's likely to be a repayment due or underpayment.

Sorry I see where you're coming from now.

I thought you were giving me figures which would have allowed 7 tax-free months. However what you are saying is that the amounts are cumulative and in the 8th month this is what would apply, regardless of having worked or not.