About taxes

cebs

Last week I got my pay slip but for the first time I had to pay some NI contributions as I had earned more than £149 per week.
I get £6.19 per hour (not a pennny more than minimum wage! :mad:) and had worked 42 hours, that totals to £259.98. The National Insurance contributions were £13.26.
From the gov.uk site:

3. How much National Insurance you pay
If you’re employed You pay Class 1 National Insurance contributions. The rates are:

• 12% on your weekly earnings between £149 and £797
• 2% on any weekly earnings over £797

12% of £259.98 is about £31.20, so why did I pay only £13.26?

About working tax, it says that the personal allowance is £9440 per year. How can they know if I'm within the personal allowance if I work a different number of hours each week? Or is it calculated at the end of each tax year (in April I believe)? Until now I haven't payed any working tax (or PAYE tax as it says on my pay slip).

DomRavioli

The whole concept of deductions is based on PAYE - Pay as you earn.

Coraline

cebs wrote: »

Last week I got my pay slip but for the first time I had to pay some NI contributions as I had earned more than £149 per week.
I get £6.19 per hour (not a pennny more than minimum wage! :mad:) and had worked 42 hours, that totals to £259.98. The National Insurance contributions were £13.26.
From the gov.uk site:
12% of £259.98 is about £31.20, so why did I pay only £13.26?

About working tax, it says that the personal allowance is £9440 per year. How can they know if I'm within the personal allowance if I work a different number of hours each week? Or is it calculated at the end of each tax year (in April I believe)? Until now I haven't payed any working tax (or PAYE tax as it says on my pay slip).

If was sober I'd do the maths, but I believe the 12% you mention would only apply to the amount you earn above the £149, so it's based on your total earnings minus the "tax free" portion of £149.

So roughly £260 minus £150 equals £110, and if you tax that £110 excess at 12% you'd get about 13 quid.

I have no clue to how the PAYE works...can't wait to figure it out!

cebs

DomRavioli wrote: »

The whole concept of deductions is based on PAYE - Pay as you earn.

So when are they going to deduct any working tax from me? I still don't understand how can they know if I'm going to earn more than £9440 per year if I work a different amount of hours each week.

Coraline wrote: »

If was sober I'd do the maths, but I believe the 12% you mention would only apply to the amount you earn above the £149, so it's based on your total earnings minus the "tax free" portion of £149.

So roughly £260 minus £150 equals £110, and if you tax that £110 excess at 12% you'd get about 13 quid.

I have no clue to how the PAYE works...can't wait to figure it out!

Yeah it turns out to be £13.32, so I got 6p extra. :P

MoneySavingUser

the 9440 is divided by 12 for monthly paid employees and 52 for weekly paid - they work it out cumulatively i.e. they work out your total pay to date and the total tax due to date and compare it to what has been deducted so far.

What is your tax code?

redpete

cebs wrote: »

So when are they going to deduct any working tax from me? I still don't understand how can they know if I'm going to earn more than £9440 per year if I work a different amount of hours each week.

They deduct income tax based on how much you have earned since the beginning of the tax year and assume you'll earn the same amount proportionately until the end of the year.

So if you earn £1000 in month 1 they assume that you will earn £12000 over the year and charge you tax on this basis; it will use £9440/12 to work out your allowance for that month..

If you then earn £2000 in month 2, so total £3000 in 2 months, they'll assume you will earn £18000 over the year and charge you on that basis - allowing for the tax you already paid in the first month.

By the end of the year you will have paid the right amount of tax.

NI is different because that is always worked out on how much you earn in the pay period (week or month), not how much you earn over the year.

cebs

MoneySavingUser wrote: »

What is your tax code?

944L.

I think I've understood how it works, thanks.