Part Year Income Tax (Totally confused!)

petepete99

Hi all ye MSEers,

I have a question regarding income tax that no calculator can appear to answer.

I just started a job paying £25k pa, in December. It's my first job of the tax year as I was living in Canada until recently.

My tax code is 747L.

I received my first pay at the end of Dec, and there was NO tax at all, just NI.

Now, I get a guaranteed bonus of £1500 this month and also £1500 next month, then I will be back to my normal £25k pa unless I perform a miracle in my sales position.

Can anybody tell me what I can expect to see NET at the end of January? Will I pay just a teeny bit of tax or will I get stung because I didn't get any last pay?

Totally confused, obviously I know my tax-free allowance is £7,470 but I will earn more than that between 1st Dec and 28th April.

Can anybody help?!

Cheers


Totally Confused Guy (Pete)

[Deleted User]

You only start paying tax on earnings over £7470 in this tax year, which incidentally runs to 5 April 2012.

So, as you know, once you have earned over this amount you will start paying tax. Usually this would be assumed to be pro-rated over 12 months.

Assuming that you worked full month in Dec, based on £25K a year, with no tax deducted you should have been paid around £1906 -£177 NI Dec - is that right? If so,

£1906 (Dec) + £1906 + £1500 (Jan) + £1906 + £1500 (Feb) = £8718, tax will kick in in Feb pay (you will pay tax and NI on £1248 @ approx 23%).

£21906 - Mar - you will pay tax and NI on all of this, so should get paid around £1613 net.

Does that make sense? I hope I am right about this, only trying to help!

lisstentotaxman.com is a helpful website.

Best

[Deleted User]

The way it works is that HMRC base their calculations on the "assumption" that you will be earning the same amount during any tax year.

They have no way of knowing that you have 2 guaranteed extra payments before tax year end, otherwise you would be paying a tiny amount of tax over the 4 months left in this tax year, (Dec, Jan, Feb, Mar). As it is you will only go over the threshold by a marginal amount, which they will pick up at a later date.

petepete99

I think I get it. Bloody tax system is so convoluted but it beats having to pay a federal and provincial like I did in Canada!

I usually do use listentotaxman, it's a great site, but it doesn't do part year income.

Thanks for your input though, much appreciated...

[Deleted User]

petepete99 wrote: »

I think I get it. Bloody tax system is so convoluted but it beats having to pay a federal and provincial like I did in Canada!

I usually do use listentotaxman, it's a great site, but it doesn't do part year income.

Thanks for your input though, much appreciated...

The thing with listentotaxman is that it breaks it down by week, month etc, and tax and NI deductions, so you can work it out from there. Good luck, enjoy your bonus.

AnxiousMum

Welcome from a fellow Canuck

When you get your P60 - do a check to make sure that you haven't overpaid tax and NI (and even though you don't pay Provincial and Federal tax here, you pay through the nose anyway ). Unlike Canada, there are no compulsory 'tax returns' at the end of the financial year (April 6th) to do, so if you've overpaid, you need to get in touch with them off your own bat. They will certainly track you down (it may take five to ten years) if they find you have underpaid.

When we came here, it was a simple phone call to ensure that a refund was issued, as OH had not had a tax code to begin with and was paying emergency tax for the first few months.

Do you have a permanent NI number yet? If you do, (I assume you do as you have a tax code), then you shouldn't get dinged the emergency tax.

petepete99

AnxiousMum wrote: »

Welcome from a fellow Canuck

When you get your P60 - do a check to make sure that you haven't overpaid tax and NI (and even though you don't pay Provincial and Federal tax here, you pay through the nose anyway ). Unlike Canada, there are no compulsory 'tax returns' at the end of the financial year (April 6th) to do, so if you've overpaid, you need to get in touch with them off your own bat. They will certainly track you down (it may take five to ten years) if they find you have underpaid.

When we came here, it was a simple phone call to ensure that a refund was issued, as OH had not had a tax code to begin with and was paying emergency tax for the first few months.

Do you have a permanent NI number yet? If you do, (I assume you do as you have a tax code), then you shouldn't get dinged the emergency tax.

Actually, I am a UK Citizen, I was just in Canada for a few years

But yes, regardless I will still need to check my P60 at the end of the year!

PS I miss Canada, can't wait to get back there for a while. I don't miss the snow or the wind chill though...

chrisbur

On a code of 747L you are allowed to earn £7475 before tax is paid on your total yearly taxable income. This is given to you as 1/12 of this for each month you are paid and you do not pay tax untill your taxable income is greater than your tax free amount for that month. So in your case say earnings for Dec are £2083 your tax free would be about £5600 so no tax, In Jan say £3583 to give total of £5666 and tax free now about £6230 so no tax. In Feb £3583 again so total £9249 and tax free about £6850 so tax due on £2399.
In March say £2083 then total is £11332 and tax allowance now £7475 so tax due on £3857 less the £2399 it was paid on last month so leaves £1458 to pay on this month.

One word of warning the code 747L may not be the correct code for you, this is an emergency code, I would assume that you filled in a P46 declaring that this is your first job this year, if there is anything eg taxable benefit in your job, that will alter your code from the basic allowance of £7475 it will be adjusted later by the tax office.

Listen to the taxman site will not give you the correct tax figure untill the year end, when you can use it to check the totals on your P60 or last payslip, and assuming no benefits etc 747L will be your correct tax code as the basic allowance is used for the emergency code.