Tax Calculation

RichCH

Sorry to ask such a general question, but maybe someone cleverer than I can help me work this out.

I don't earn a flat amount each month, ever. I get bonuses virtually every month to varying amounts, sometimes it has been five figures in one month. What this means of course is on that particular month, let's say for example I get paid £7,000, I get taxed like I earn £84,000 a year.

I've used the tax checker on the HMRC website and entered what I have earned so far this year and also the amount of tax I have paid so far this year. According that that I am owed £4,500 in tax.

Now, does this actually mean I should consider myself £4,500 richer than I actually am currently? Or is it not going to work out like that come the end of March and the end of the tax year?

I tried adding into the equation my salary for the next six months if I earned basic wages and paid the normal amount of tax every month, but it says if I did that I would only be owed £2,000 at the end of the year.

To give you the raw figures so maybe someone can tell me how much money I am actually missing from my pocket:

Total gross pay to date (end of September): £39,892.00
Tax Paid to date: £10,897.80

The reason I am trying to work this out is because we're trying to buy a house the beginning of next year and I am trying to work out how much money we have for the deposit.

Or doesn't it work like that? Does the amount of tax I am currently owed now depend on how much I earn for the rest of the year?

Anyone who replies I greatly appreciate the help.

Dazed_and_confused

Impossible to say without knowing what your tax code is. What is the code on your latrst payslip, has it been the same on every payslip from 6-4-2012 and does the code on your payslip agree the code you got from hmrc (if you have been sent one)

RichCH

I just have a normal tax code: 810L

Dazed_and_confused

You have paid the correct amount for code 810L to month06 (end of September). Are you sure you've filled in the calculator correctly

RichCH

I have been using this: http://stccalculator.hmrc.gov.uk/UserDetails.aspx

If I put in 2012/2013 as the tax year and my figures so far this year it says I've paid too much tax and am owed a refund of £4,739.60

Maybe I'm looking at this the wrong way.

If I earned my basic wage for the rest of the year I would earn a further £11,502. This would mean I will have earned £51,394 for the whole year. The income tax due on that amount is £10,441.60.

I've already paid £10,897 so that actually means I don't have to pay any tax for the rest of the year and then I'm owed some on top.

On my basic wage I would pay roughly £250 a month normally, so that for 6 months and then I'm owed nearly £500.... so basically I'm actually owed only £2,000 it seems.

Dazed_and_confused

Even if your pay was £0 for the next 6 months you wouldn't get £4739 back, tax due by month 12 for tax code 810L and total pay of £39892 is £6356 so maximum refund, assuming no more pay �� would be £4540. What do you estimate your taxable pay will be on your next (month 7?) payslip?

RichCH

£1917 is my gross pay per month, if I do earn basic next month.

But I believe I have already answered my own question in my previous post.

chrisbur

Assuming your tax code is about 810L and your last pay was at month 6 we have....
Gross 39892 less tax allowance 6/12 of 8105 ie 4052 which gives 35840 on which tax is due.
Yearly allowance for 20% tax is 34370 so 6/12 of that is 17185 so 20% of that is 3437
This means 40% tax on the rest which is 35840 - 17185 ie 18655 which at 40% is 7462
3437 + 7462 is 10899

The slight differance will be down to me rounding several figures and possibly slightly different tax code, so assuming my assumptions are about right your tax looks correct.

As far as the tax calculations you did the first answer where you were "owed 4500" this was working out what tax was due at the year end and was assuming you had no more earnings for the next 6 months.
In general tax calculaters are not reliable if your earnings vary and you are into the 40% tax band, you do need to understand tax to know when the answer they give can be trusted; but of course if you understand tax you do not need the calculater.

The only time they give a reliable answer is at the tax year end when you know your gross and tax figures, but then they may give the wrong NI figures.

As I say your tax looks correct (if my assumptions are correct) and the way tax works it self corrects as the year goes on, so if you get a binus early in the year and this results in extra tax as your earnings then go down any extra tax that was taken is returned to you through your salary to correct. Every payday the tax you should pay as at that point in the year is calculated and from that is deducted what you have paid up to the last month and the differance is what you pay that month. When you get to month 12 the tax you are due for the full year is calculated tax paid already to month 11 is deducted and you then pay the differance for month 12. Full and correct tax paid for the year (unless of course something comes to light after this for example a benefit not accounted for in your tax code)

Dazed_and_confused

Based on £1917 you would pay no tax at the end of October and would also get a refund of £75 of the £10897 you've already paid.