Silly question about my Personal Allowance?

Surfeit75

Just reading an old letter from HMRC about my 2015/16 Tax Code (1060L) and I understand that my tax-free personal allowance is £10,600 but it also says something along the lines of

"We normally split your tax-free allowance into monthly or weekly amounts. This means you can get about £868 a month or £223 a week before your employer takes tax off you.

I always thought you could go through a tax year without being taxed a penny, until the moment you went over your personal allowance. However the bit in blue from the letter suggests otherwise.

I work part-time and wouldn't earn more than £868 in an ordinary month, but if I did any overtime I could quite easily go over the threshold.

My question is, say if in any one month I earned £968 would I...

a.) get taxed the basic rate (20%) on all £968
b.) get taxed the basic rate on the additional £100 only
c.) not get taxed at all providing I had not yet gone over my personal allowance
d) other

AuntyCat

The bit in the blue is correct, your PA is split into weekly or monthly amounts depending how you are paid.

So in your case monthly.
If you earn over your monthly allowance you will be taxed at basic rate on the additional say £100.

Except that - you allowance builds up over the year so in April you have £868 allowance, in May £1736 (two months worth) in June £2604 (3 months worth) if you earned £800 in April - no tax, £800 in May - no tax, but in June did overtime & earned £1200 you would have spare allowance left over from April & May so your tax would be -
earnings in the 3 months £2800 less your 3 months allowances of £2604 = £196 to be taxed at 20%.

There is another exception - if you are on a week or month 1 (usually indicated by a x after the code) you allowances are only on a month by month basis and are not being carried forward each month. This is usually if you change employers and they don't know how much you have already earned in the year. If thats the case in June in my exampl you would be taxed at basic rate on £1200-£868 = £332.
In that case you would be due a refund once your code is sorted out or at the year end.

Hope thats ok.

Surfeit75

Thanks for that

I'm sure I currently have a W1 somewhere in my current Tax Code as I started a new job halfway through the tax year.

I'm still at that same job, so should it automatically be updated from any payslip I get after April 6?

jem16

Surfeit75 wrote: »

I'm still at that same job, so should it automatically be updated from any payslip I get after April 6?

It should be.

Why didn't you get it sorted earlier? You may have overpaid or underpaid tax.