Christmas Bonus & Tax confusion

Naomim

Hi All,

Luckily this year I received a fab £8,500 christmas bonus. I also received a £1,000 bonus in April.

It lookes likes on this paypacket I was taxed at 32%
My paypacket was gross £10204.17 PAYE was £3277.06 and NI was £485.84

How does this work out? I've put below my normal salary and tax code etc

I work 4 days a week (28 hours) and get private Healthcare so I get a P11D every year which was £821 which counts a taxed benefit I believe?

My normal earning are
Gross Pay £20448.00 per year
Tax Code 662L
Healthcare £821

I just don't understand the tax as I thought it was 20% and I've not gone into the higher tax bracked.

If anyone can shed any light I'd be eternally grateful

Naomi

dzug1

On a pro rata basis you HAVE gone into the higher tax bracket.

You will get the excess back over the rest of the tax year

Lokolo

PAYE works it out based on your earnings per period.

£10,204 over a month looks as though you are a higher rate tax payer because of the amount you earned that month. It doesn't wait until you get into higher rate before taxing you otherwise anyone who was a 40% tax payer would end up paying more tax at the end of the tax year rather than spreading it across the year.

It will balance itself out over next month or 2.

zagfles

PAYE works on a year-to-date basis so doesn't really make sense as even pro-rata you shouldn't have been pushed into 40% tax. Did you get any other payments (overtime etc) earlier in the year? What is the pay period, taxable year to date earnings and total tax paid?

chrisbur

zagfles wrote: »

PAYE works on a year-to-date basis so doesn't really make sense as even pro-rata you shouldn't have been pushed into 40% tax. Did you get any other payments (overtime etc) earlier in the year? What is the pay period, taxable year to date earnings and total tax paid?

Agree with zagfles would also suggest checking your tax basis, it is possible that you are being taxed on a month 1 basis. Tax basis usually shows after your tax code on payslip, may be something like M1, mth 1, non-cumulative, X.

If you are on month 1 there will be no adjustment made over the following months; if an overpayment has occured you will need to claim at year end or contact the tax office to see if it is possible to go onto a cumulative code.

CLAPTON

your tax on 10,204 with a tax code of 662L would be almost exactly what a 662L noncum or M1 or Wk1 income would look like

i.e.

10,204
less tax free 6225/12 = 552

so gives 9,652

the first 35,000/12 (i.e. 2916.6) is at 20% so tax payable is 583
the rest will i.e. 6,735 is at 40% so tax is 2,694
so total tax is 3,277


so you need to find out why your code is non cumulative

Naomim

No overtime payments at all. only the bonuses I mentioned.

Tax Code 662L M1 Tax period 9 Taxable YTD earnings 23837.53 tax paid to date 5062.46

Naomim

CLAPTON wrote: »

your tax on 10,204 with a tax code of 662L would be almost exactly what a 662L noncum or M1 or Wk1 income would look like

i.e.

10,204
less tax free 6225/12 = 552

so gives 9,652

the first 35,000/12 (i.e. 2916.6) is at 20% so tax payable is 583
the rest will i.e. 6,735 is at 40% so tax is 2,694
so total tax is 3,277


so you need to find out why your code is non cumulative

I think it might be something to do with my Health benefit from work as I'm sure my tax code changes in the middle of the year.

For the past 2 years I have received a cheque from the tax office for overpayment. Would this be down to the M1 appearing after my tax code and does this mean I could look forward to another cheque at the end of this financial year?


Naomi x

zagfles

Naomim wrote: »

I think it might be something to do with my Health benefit from work as I'm sure my tax code changes in the middle of the year.

For the past 2 years I have received a cheque from the tax office for overpayment. Would this be down to the M1 appearing after my tax code and does this mean I could look forward to another cheque at the end of this financial year?


Naomi x

Yes, it's the M1 in your tax code that's the problem. You aren't being assessed for tax on a year-to-date basis. This might be because your health benefit increased a lot mid year - the tax office sometimes put you on a M1 code when this happens, because otherwise you'd get a big tax hit when your code drops. See your last coding notice.

You could phone the tax office and ask them to put you on a normal tax code, not sure if they can do this now though. If not you'll get a refund at the end of the year.

ceeforcat

zagfles wrote: »

Yes, it's the M1 in your tax code that's the problem. You aren't being assessed for tax on a year-to-date basis. This might be because your health benefit increased a lot mid year - the tax office sometimes put you on a M1 code when this happens, because otherwise you'd get a big tax hit when your code drops. See your last coding notice.

You could phone the tax office and ask them to put you on a normal tax code, not sure if they can do this now though. If not you'll get a refund at the end of the year.

Personally I would ask the tax office to put you on 662L cumulative because that will a) collect the underpayment before your code dropped and b) sort out the imbalance on your Christmas bonus.

Waiting for a refund from the HMRC - could take up to a year!

Mikeyorks

Naomim wrote: »

I think it might be something to do with my Health benefit from work as I'm sure my tax code changes in the middle of the year.

Unlikely. If the P11D shows a different amount when submitted by July - that will account for the Code change. But not a continuance of the non cumulative code as evidenced by 'Month 1'.

For the past 2 years I have received a cheque from the tax office for overpayment. Would this be down to the M1 appearing after my tax code

Very likely if you've been on Month 1 throughout ..... and you get uneven salary payments via eg bonuses.

The best way forward is to resolve with HMRC why you're on a non cumulative code. That way you only pay the right amount at the time. Using HMRC as an annual Bank isn't very good - as they only pay minimal interest - and only then if the refund is made a year later.