Paid in arrears (PAYE) - income tax implications

Legacy_user

Hello, could some knowledgeable people please put my mind at rest.

I recently started a new job in September. Unfortunately my line manager sat on my new starter form and I ended up missing the payroll cut off in September. They had to advance me a sum of money and I received no payslip.

I have just had my October payslip and they have paid my arrears from September, as well as October's pay (they also deducted the advance I received after tax deductions). Put simply I received double pay for this month before deductions.

However I have been heavily taxed (normally a 20% tax payer, but I have paid 40% on a proportion of this pay).

I assume this is because I received a lot of gross pay this month and it had been 'assumed' by the computers that I will earn this every month. Does this sort of thing normally sort itself out on PAYE? Unfortunately I am off work now for a week, so wont be speaking to payroll until I get back.

(normally in a month I would pay £400-500 tax at this salary level, but paid over £1400 in tax this month - averaging £700 for each of the 2 months).

Hope that makes sense.

Thanks in advance.

CLAPTON

what is your tax code?

System

Its 944L - which is correct - same as my old job

jem16

teepee83 wrote: »

Its 944L - which is correct - same as my old job

Any Mth1 suffix after the tax code?

Did you not have a P45 to hand in?

System

Tax code: 944L NONCU

No P45 yet from old employer, chasing them over this.

Tax code seems to be fine - i've been taxed as if I earn double the salary I actually do. Ive plugged my numbers into Martin's income tax checker on this site and the tax figures match exactly.

jem16

teepee83 wrote: »

Tax code: 944L NONCU

No P45 yet from old employer, chasing them over this.

Tax code seems to be fine - i've been taxed as if I earn double the salary I actually do. Ive plugged my numbers into Martin's income tax checker on this site and the tax figures match exactly.

Tax code is not fine. You are on the emergency tax code as that is what the NONCU stands for - ie non cumulative.

You need to be on a cumulative tax code as you will not receive any rebate of overpaid tax until you do. It is also likely that you would not have paid so much tax to begin with if it had been a cumulative tax code as you would have got the benefit of the unused September allowances.

P45 is really needed here.

CLAPTON

teepee83 wrote: »

Tax code: 944L NONCU

No P45 yet from old employer, chasing them over this.

Tax code seems to be fine - i've been taxed as if I earn double the salary I actually do. Ive plugged my numbers into Martin's income tax checker on this site and the tax figures match exactly.

the code is incorrect

on the other hand without a P45 it's appropriate

the NONCU means non accumulative, so the tax is based on the actual monthly gross payment : so you won't get the tax back until your correct details are input to your payroll system.

chrisbur

As has been said you have been taxed on the emergency tax code and this will be corrected when you either give your new employer a cumulative P45 or when HMRC advise a cumulative tax code along with pay and tax details to your employer. Have you though checked your NI deduction, it often happens that in cases like this the NI is calculated as if only one payment is being made rather than two which results in over-paying NI and this does not self correct in the way that tax does. Assuming that you are not contracted out you can check on the income tax checker on this site. Put in the gross for each month separately and add the two together, this is what you should have paid.

System

chrisbur wrote: »

As has been said you have been taxed on the emergency tax code and this will be corrected when you either give your new employer a cumulative P45 or when HMRC advise a cumulative tax code along with pay and tax details to your employer. Have you though checked your NI deduction, it often happens that in cases like this the NI is calculated as if only one payment is being made rather than two which results in over-paying NI and this does not self correct in the way that tax does. Assuming that you are not contracted out you can check on the income tax checker on this site. Put in the gross for each month separately and add the two together, this is what you should have paid.

Thanks for all your help - that makes sense now! Basically I really need my P45 so will have to push my previous employer.

I have actually underpaid NI and thinking about it I assume this is because around the 40% tax threshold the NI conts drop from 10 to 2% I believe? So I will have paid 2% on a fair chunk instead of 10%? As you said chrisbur, they have treated it as one payment instead of two. Will this also self correct when get P45? - If not, what do I need to do?

Thanks in advance

nomunnofun

teepee83 wrote: »

Thanks for all your help - that makes sense now! Basically I really need my P45 so will have to push my previous employer.

I have actually underpaid NI and thinking about it I assume this is because around the 40% tax threshold the NI conts drop from 10 to 2% I believe? So I will have paid 2% on a fair chunk instead of 10%?
Thanks in advance

Nearly - you are correct in saying that, after the tax sorts itself out, you will still have saved NIC in the manner that you have suggested. The saving will be based on the difference between 12% (not 10%) and 2%.

chrisbur

teepee83 wrote: »

Thanks for all your help - that makes sense now! Basically I really need my P45 so will have to push my previous employer.

I have actually underpaid NI and thinking about it I assume this is because around the 40% tax threshold the NI conts drop from 10 to 2% I believe? So I will have paid 2% on a fair chunk instead of 10%? As you said chrisbur, they have treated it as one payment instead of two. Will this also self correct when get P45? - If not, what do I need to do?

Thanks in advance

NI will not auto-correct as tax does; but as you have underpaid I would just forget about it if I was you.