Help understanding Tax paid 14/15 would be appreciated!

GlennC92

Hi All,

New member - was hoping i could get some advice regarding the income tax that i've paid for the year 14/15.

A bit of background, i came straight out of university and started working in September last year. My standard salary is £25250 and due to my company car i'm on a tax code of 884l.

Since i started working part way through the year i earned a total of £13,838.21 for the tax year 2014/15.

In this year i have paid £1552.20 income tax according to my P60.

I'm new to this so could be entirely mistaken, but my understanding was that the income tax i paid should be determined as follows: £13,838.21 (earnings last year) - 8840 (tax free allowance) = £4998.21.

I would then pay 20% on this figure which would work out as = £999.65

I am struggling to work out where the difference between the £1552 i've paid and the £999.65 that i've calculated comes from.

If you've got this far, cheers! Quite possible that i'm just looking at this all wrong.

Any help appreciated,

Glenn

chrisbur

GlennC92 wrote: »

Hi All,

New member - was hoping i could get some advice regarding the tax that i've paid for the year 14/15.

A bit of background, i came straight out of university and started working in September last year. My standard salary is £25250 and due to my company car i'm on a tax code of 884l.

Since i started working part way through the year i earned a total of £13,838.21 for the tax year 2014/15.

In this year i have paid £1552.20 national insurance tax according to my P60.

I'm new to this so could be entirely mistaken, but my understanding was that the income tax i paid should be determined as follows: £13,838.21 (earnings last year) - 8840 (tax free allowance) = £4998.21.

I would then pay 20% on this figure which would work out as = £999.65

I am struggling to work out where the difference between the £1552 i've paid and the £999.65 that i've calculated comes from.

If you've got this far, cheers! Quite possible that i'm just looking at this all wrong.

Any help appreciated,

Glenn

You refer to " £1552.20 national insurance tax " Are you adding up the tax and national insurance?

Your earnings are liable to deduction of tax (as per your calculation ) and also national insurance which is deducted based on your earnings for each pay period.

Would need to know your monthly salary for each month to check NI, but on rough calc. looks about right.

GlennC92

Hi Chris,

Apologies -

I've paid £1103 in National Insurance and £1552 in Income.

Income tax monthly - Around £255
NI Monthly - Around £160

I've updated my post to correct the error.

Cheers,

Glenn

chrisbur

What comes after your tax code EG X non-cumulative 1 mt1 anything like that?

GlennC92

Hi Chris,

Just realised - My full Tax code is "884L M1"

audigex

Simply put: your current employer has no idea how much tax you've paid so far this year, so has to assume that you've already used the first 5 months of tax allowance april-september

Your tax allowance is worked out as though it was over the whole 12 months, even if you only work 7 months of it. It's then applied to your salary as if it was over the 12 months, and then rebated if it turns out you didn't earn that much.

Essentially, PAYE assumes that whatever happens this month, has happened all year and will happen for all of next year.

So your 884L means £8,840 earnings before you pay tax. We divide that by 12 to give ~£737/month before you pay tax. This is how it's worked out regardless of whether you started work in April or September.

You've only worked 7 months though, so your effective tax code is actually £8,840/7 months = £1260, which should save you around £600, and is the difference between the £1550 you paid and the £1000 you should have paid

Now that the tax year has ended, HMRC will work this out, realise you didn't work all year and in a month or two will send you a cheque for the difference

W1 (week 1) and M1 (month 1) are emergency tax codes. This means your tax is based only on what you are paid in the current pay period, not the whole year. These codes are sometimes known as ‘non-cumulative’.

GlennC92

Cheers Audigex! That was a very precise and helpful explanation. Good to know i wasn't imagining things thinking my income tax was far off the mark.

One last question: Do i need to contact HMRC directly or can i trust them to issue me a check without needing prompting?

Cheers,

Glenn

McKneff

Give them a ring, it wont do any harm....

jem16

GlennC92 wrote: »

One last question: Do i need to contact HMRC directly or can i trust them to issue me a check without needing prompting?

It should sort itself out automatically. However you could try claiming online if you have your P60 as you will need your employer's PAYE reference number. It may also be on your March payslip.

https://www.signin.service.gov.uk/start

GlennC92

Thanks all, i'll do just that and see how i get on.

Cheers,

Glenn

Savvy_Sue

the other thing to check is that you're NOT on a M1 tax code now we're in a new tax year.

Really, your employer should have given you a new starter form to find out whether you'd had a job earlier in the tax year. If they'd done that, and you'd filled it in right, this shouldn't have happened. So check they are sufficiently together to have changed your tax code.