New job and tax

gwen80

Hi

Not sure if I'm posting this in the right place, but feel free to move if so. I took redundancy from my old job and left at the end of Feb. I started my new job on 1st July. I've just been paid for the first time and paid no tax?! When I queried this with HR they said that as I hadn't worked yet this tax year I wouldn't pay tax until I got over the personal allowance. Is that correct? I don't want to get hit with a tax bill later on.

Thanks

Gwen

nomunnofun

Partly correct. Your personal tax free allowance is normally 9445. While it is true that you will not pay tax if your earnings do not exceed this amount in the tax year it works slightly differently. You will receive 1/12 of the personal allowance each month and, for example, by the end of July you would need to have earned 4/12 of 9445 (3148) to have paid tax - July is the fourth month of the tax year. If you have not earned this amount to date you will not pay tax this month. By the end of August your tax free allowance will have increased to 3935, by the end of September - 4723 and so on. It should follow that, until the amount earned since April exceeds your personal allowance to date, you will not pay tax.

gwen80

nomunnofun wrote: »

Partly correct. Your personal tax free allowance is normally 9445. While it is true that you will not pay tax if your earnings do not exceed this amount in the tax year it works slightly differently. You will receive 1/12 of the personal allowance each month and, for example, by the end of July you would need to have earned 4/12 of 9445 (3148) to have paid tax - July is the fourth month of the tax year. If you have not earned this amount to date you will not pay tax this month. By the end of August your tax free allowance will have increased to 3935, by the end of September - 4723 and so on. It should follow that, until the amount earned since April exceeds your personal allowance to date, you will not pay tax.

Thanks. I was confused by the explanation by HR because that would mean that people wouldn't pay tax every year until they'd reached the personal allowance and normally when you're in continuous employment you pay the same amount of tax every month.

So my gross salary is approx £2400/month so I would expect to start paying tax next month as 2 x £2400 is > £3935.

I think I may also be due some tax back from the last tax year, so I'll have to sort that out.

Gwen

nomunnofun

That's correct - You should pay £173.00 tax next month (865 @ 20%). Thereafter it should be around £322 per month.

It is assumed of course that you did indeed have no other earnings or taxable benefits since April.

gwen80

nomunnofun wrote: »

That's correct - You should pay £173.00 tax next month (865 @ 20%). Thereafter it should be around £322 per month.

It is assumed of course that you did indeed have no other earnings or taxable benefits since April.

I haven't claimed any benefits, so there are none of those. I was paid a bonus on 25th April for 2012 from my old company.

nomunnofun

gwen80 wrote: »

I haven't claimed any benefits, so there are none of those. I was paid a bonus on 25th April for 2012 from my old company.

If this was paid in April 2013 and tax at 20% was deducted, there is no issue. Otherwise, you will find that you will be underpaid tax of 20% of the bonus. Both assumptions assume that the bonus was under £21000 or so.