PAYE notice - confused

bootman

I have 2 small jobs. Job 1 is taxed at BR job 2 has a coding. I had my notice through 2 weeks ago for 07/08 it said 604T. made up as the following

£5225 personal allowance
£822 Starting rate adjustment - THIS IS WHAT I AM CONFUSED ABOUT
£6047 Total.

I have today had a new notice come though as they have finally added a £2 a week working from home allowance, but at the same time reduced my starting rate adjustment. It now reads

£5225 personal allowance
£96 job expenses
£566 Starting rate adjustment
£5887 total.

I cannot work out how they calculate the starting rate adjustment. The notice under note 3 says. The first £2150 of your taxable income, wherever it comes from is taxable at 10%. We do not think you will earn enough at XXX to pay tax on £2150. We know you have another job where your pay is taxed at 22% so, to make sure you get the benefit of all the £2150 at 10% rate we add an allowance of £566 to you tax free amount.

So which notice is correct?? the first one giving me £822 or the second one giving me £566. They both say the same thing giving 10% adjustment for the £2150 but different amounts. What is the calculation to get this figure?

Many thanks

malcindebt

what is the income at both jobs? It can be calculated but need this information.

bootman

Job 1 £2000 Job 2 £7000

Hoddie_2

Tax due on your expected 07/08 income would be as follows:

£5321 @ 0% (5225 PA plus 96 EXP)
£2150 @ 10% = £215
Balance of 1529 @ 22% = £336
Total £551

Without the Starting Rate Adjustment (SRA), the tax you'd pay is as follows:

Job 1
£2000 @ 22% = £440
Job 2
£5321 @ 0%
Balance of 1679 @ 10% = £167
Total £607

You'd pay £56 too much tax because you haven't had the full 2150 10% band, only 1679 of it. You've paid 22% tax on £479 of your income that should only have been taxed at 10%. To prevent this overpayment they inflate your tax free allowances.

Your income will be taxed as follows:

Job 1
£2000 @ 22% = £440
Job 2
£5887 @ 0%
Balance of 1113 @ 10% = £111
Total £551

Hope that helps.

Edit: The earlier code would not have deducted enough tax. Seems HMRC had incorrect estimates for your 07/08 income.

bootman

Thanks Hoodie for the explanation.

Louise1521

Can you tell me more about the homeworking allowance please?