Tax Code query

Tabitha_T

Can anybody help with this please. I did call the tax office but they couldn't help (even though I'm sure it can be classed as a general query). Anyway, they said they could only tell my OH but he's at work.

My OH started full time work recently and gave his new employer his P45 issued by the Jobcentre (been on JSA for 2 yrs). From memory, the P45 showed a tick in the Wk 1 box. His payslip is showing a coding of 810L but also shows as being non-cumulative. A colleague advised him that he should be on a cumulative basis or he will pay too much tax. We are a little unsure how this works and what it actually means. Could anybody shed any light please and explain the difference between cumulative and non-cumulative? Thank you. Tabs

skintandscared_2

I believe that non-cumulative is used when an employee begins employment after the first month of a new tax year (i.e. after 6th April), and does not have previous earnings in that tax year that need to be taken into account. Each month is taxed as an individual "stand alone" month. I think this will switch to cumulative after the new tax year starts on 6th April 2013 but hopefully someone will clarify that.

Suewre

The tick in the Wk 1 box is what told your OH's employer to use a non-cumulative tax code. The P45 in this case would not have details of the taxable pay to date and tax paid to date, so a non cumulative code had to be used or not enough tax would be paid.

With a cumulative tax code, each month (or other pay period) the total taxable pay to date would be looked at, and the tax free pay to date would be deducted - for example, we are now in month 7, so for a tax code of 810L the tax free amount is £8,109 divided by 12, multiplied by 7. Next month this would be multiplied by 8. The tax due to date is then calculated, the tax already paid is deducted, and this leaves the tax due.

With a non-cumulative code, it is looked at as if it was month 1, each month.

When HMRC receive info of your OH's taxable pay to date and tax paid to date from JSA, then they can inform his employer of these figures, and issue a cumulative tax code. If his taxable income prior to starting work did not use up all his tax free allowance to date, he should receive a tax rebate.

However, if he was earning enough to pay tax previously, and was paid from JSA and his job in the same tax month, he might have underpaid tax because he received two lots of tax free allowance in one month.