Income Tax/Bonus payment calculation

JKSandy

Hi is anyone a wiz at working out tax?

Why was I taxed so much on my bonus?

My annual salary is £27000 and tax code is 827L M1 (I believe the M1 is because I changed employers in May)

*I don't have a P45 at hand for my wages in my last job April/May, I earned around £1250 a month after tax.

I recieved a bonus of £3000 6th FEB, this was paid as an extra "wage" my wageslip: pay period 10.1

2013 Bonus Payment £3,000.00
Tax Paid £987.50
NI Contracted I £180.40
Student Loan £270.00

Total Gross £21,276.92
Taxable Gross £21,596.61
Tax Paid £3,562.90
Employees NI £1,753.47

My wage and tax up until: pay period 10/January

Basic Pay £2,250.00
Tax Paid £321.00
NI Contracted I £192.48
Student Loan £79.00

Total Gross £18,276.92
Taxable Gross £18,596.61
Tax Paid £2,575.40
Employees NI £1,573.07

Thanks

purdyoaten

The problem is the M1 after your code. This means that any remuneration received will be taxed according to your tax free allowances and basic rate band for that ONE MONTH without taking into account payments already received in that tax year.

You need to find out why:

a) you are on a code of 827L (should be 944L) - perhaps benefits in your previous job?

b) get the M1 removed. Otherwise, if not resolved by March pay, you will have to make a formal claim after the tax year end.

The tax on the bonus should be £600 exactly.

JKSandy

Thanks, yes my tax code is for medical insurance via work and an underpayment from a previous year.

I will call the tax office, I had thought the M1 was just because I changed jobs.

purdyoaten

JKSandy wrote: »

Thanks, yes my tax code is for medical insurance via work and an underpayment from a previous year.

I will call the tax office, I had thought the M1 was just because I changed jobs.

Presumably M1 on the form P45 and your new employer, quite correctly, has applied that ever since.

zygurat789

If the M1 is there because of an underpayment of a previous year, I doubt they will remove the M1.
It would have been put there for your benefit. Had it been applied in (say) month 8 then 8 months arrears would all have been taken from one months pay which could have left you with nothing.
Yes you have been, ostensibily, overtaxed on your bonus but look on it as paying your overdue bill. Your tax was always going to have to be checked at the year end, be proactive and write to them with your March 2015 total figures and try and get them to deal with you first.

JKSandy

The tax year I had underpaid was 2008/2009 as I was doing temping in various jobs, I got a letter in 2012 to say my taxcode for 2013/2014 would be 827L rathar than 944L around £550 for benefit in kind and the reset for the underpayment.

In my old job it was just 827L, I will give them a call then to say what the say about the M1

JKSandy

Well called HMRC at lunch.

They said they had me down as a 40% tax payer and the benfit in kind; medical insurance was coming off from both my old and current employer.

She is issuing me with a new taxcode of 777L and says I have under paid tax of around £100 up until my last wage in January, hopefully with the overpayment on my bonus it should be more in my wage by the end of tax year rather than less.