PAYE calculation

ntrolls

Being not familiar with UK income tax process, I am seeking some clarification on how PAYE income tax model works.

On top of my normal wage, I had some additional income. One from a part-time job I did for a company for 6 months (for which they issued P45 and collected tax for basic rate) and another an one-time payment from my regular employer for an overtime project. Now, all of these puts me slightly above the base rate limit, but my regular pay-slips are now showing a bit too much tax. Right now, (tax paid so far) / (gross income - basic allowance) equals about 24%, although (gross income - basic allowance) is way below the base rate limit.

It seems like HMRC estimated my end-of-year income by treating all those additional income as if they are parts of my regular wage and projecting this value for 12 months.

1. Is my understanding correct?
2. Is there any way to correct the amount of tax I have/will have paid before the end of tax year?

Mikeyorks

The part time job will have correctly collected 20% on all income via Code 'BR'? Which will have the effect (no allowances - as in use at the main job) of pushing you above 20% if you add everything together.

But if you're meaning the 24% is purely on the main job? Then that can happen for a period if an overtime payment of some substance pushes you temporarily into the 40% band. It will right itself over a couple of months - if your gross is below £42475 (the 40% threshold)

Some real figures (pay / tax /Code) and dates would help?

ntrolls

@Mikeyorks: Thanks. No, I've calculated 24% by adding the total gross income (i.e. main job salary + part time job + one-off overtime work). The part-time job did collect 20% at BR, as you pointed out.


Here are the specifics:

===================
Tax code at main job: 747L

October pay slip from main job
Total gross: 22,152
Taxable gross: 22,152
Total pay & allowances: 3,265
Income tax: 528

Then the part-time job company processed their P45 for the £5,000 (gross, i.e. they took 1,000 as tax) they paid me, resulting in:

November pay slip from main job
Total gross: 25,417
Taxable gross: 30,417
Total pay & allowances: 3,265
Income tax: 947

Finally, the December pay slip contained the one-off overtime work at the main job:

December pay slip from main job
Total gross: 31,116
Taxable gross: 36,116
Total pay & allowances: 5,699 (additional 2,433 one-off)
Income tax: 1,447

===================

From what you've said, I assume that once I get back to receiving just the regular salary in January, the tax will be automatically adjust itself. And this would be because HMRC applies the allowance on monthly basis rather (i.e. broken down to smaller amount per month) than annually... am I right?

Mikeyorks

ntrolls wrote: »

And this would be because HMRC applies the allowance on monthly basis rather (i.e. broken down to smaller amount per month) than annually... am I right?

That's exactly right. The personal allowance and the 20% rate band are both allocated as 1/12th monthly. You will have slipped into the 40% band ..... and that should unwind over the next month or so.

But - is there a link between the part time employer and the normal employer? As it appears from your figures that the P45 (pay, at least) has been merged with your full time data?

That shouldn't happen normally. The correct way is as here :

http://www.hmrc.gov.uk/employers/faqs.htm#4 (top Q and A)

...... did they seek HMRC input do you know?

ntrolls

Thank you for the link.

No they are not related at all... which is partly why I was totally confused at the beginning. I expected something to happen at the end of the tax year when they collect all information. When I asked around, the payroll at my regular job told me that they received a P6 from HMRC to adjust my tax.

But then again, I did not know that I had to send the P45 from the second job (the form itself only says something about moving onto a new job) to HMRC and I did not. Should I do this now, or it is ok now that HMRC somehow figured that out by themselves?

I will see how my January payment goes.

Mikeyorks

ntrolls wrote: »

When I asked around, the payroll at my regular job told me that they received a P6 from HMRC to adjust my tax.

I would pick that up with them - I'd assumed the 747L (standard basic Code) was continuing.

As your employer has somehow infiltrated the P45 data into their payroll I think it's something they should check with HMRC. As you're running into the year end just under 40% then it should all be OK. Provided - in absorbing the P45 figures - they haven't cause a problem. Without the 'tax to date' figure alongside those payslip details you've posted - I can't really tell.

But - if HMRC are oblivious and then go on to add the part time job P45 to the normal figures (which appear to now include the £5k?) .... at the end of the year - you will finish underpaid as it will take you into 40%. So that is best headed off at the pass?

ntrolls

I've added the tax total to the previous information below:

===================
Tax code at main job: 747L

October pay slip from main job
Total gross: 22,152
Taxable gross: 22,152
Total pay & allowances: 3,265
Income tax: 528
Tax paid so far: 3,557 (everything normal up to here)

Then the part-time job company processed their P45 for the £5,000 (gross, i.e. they took 1,000 as tax) they paid me, resulting in:

November pay slip from main job
Total gross: 25,417
Taxable gross: 30,417
Total pay & allowances: 3,265
Income tax: 947 (419)
Tax paid so far: 5,505

Finally, the December pay slip contained the one-off overtime work at the main job:

December pay slip from main job
Total gross: 31,116
Taxable gross: 36,116
Total pay & allowances: 5,699 (additional 2,433 one-off)
Income tax: 1,447 (417)
Tax paid so far: 6,952

===================

Tax code remained 747L throughout, including December pay slip. My annual regular salary is 36,862 so I think I will be £1,820 above the basic rate limit at the year end (36,862 + 5,000 + 2,433 - 7,475 = 36,820). From January onwards, I will only receive my regular salary (with only 20% tax, if the allowances are applied bi-weekly). As far as I understand, by the end of the tax year, I need to pay 20% additional from the 1,820 which is £364, apart from my 20% PAYE. So far, I paid about £850 additionally: in November, 419 more (947 - usual 528) and in December, 432 more (1,447 - 528 - 2,433/5).

I am beginning to think that it may be best to see what my January pay slip says.

Anyway, thank you once again for all your help. Hope you're having a nice holiday!!