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High tax on basic & bonus - is this correct?

djwood1
djwood1 Posts: 31 Forumite
edited 22 October 2015 at 6:35PM in Cutting tax
Hello

I've recently started a new job, here are the details:

£40,271.04 Basic

I've only been here for 3 months, today I received my first bonus of £4304.

Total earnings for October
£7,660.27

Deductions:

Tax @ £2,259.45
NI @ 425.76
Student Loan @ 559
£3,244.21

Amount Paid
£4,416.06

My net wage is normally £2320 meaning my net bonus payment was only £2096.

The tax seems very high, is this a case of the HMRC assuming I'm earning 90k and applying increased tax or is this expected? My tax code hasn't changed from 824T

Thanks

Comments

  • chrisbur
    chrisbur Posts: 4,263 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    This suggests to me that your tax code is being applied on a month 1 basis though cannot say for certain without knowing your year to date taxable earnings.
  • CLAPTON
    CLAPTON Posts: 41,865 Forumite
    10,000 Posts Combo Breaker
    are there any letters after the tax code 824T (like M1 or noncum etc)?
  • djwood1
    djwood1 Posts: 31 Forumite
    No letters after 824T. The first month I was on 1060L then it went to a M1 code, this is the first month that I've been on my 824T after many hours spent onto HMRC.

    Being really simplistic here.....my basic per month is £3350 which amounts to £550 tax deductions.

    My total net for this month was £7600 so roughly double so I imagined the tax to be circa £1100-1400, not £2200.

    It's probably a lot more complicated than than!
  • chrisbur
    chrisbur Posts: 4,263 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    djwood1 wrote: »
    No letters after 824T. The first month I was on 1060L then it went to a M1 code, this is the first month that I've been on my 824T after many hours spent onto HMRC.

    Being really simplistic here.....my basic per month is £3350 which amounts to £550 tax deductions.

    My total net for this month was £7600 so roughly double so I imagined the tax to be circa £1100-1400, not £2200.

    It's probably a lot more complicated than than!

    Can you advise your year to date earnings?
  • djwood1
    djwood1 Posts: 31 Forumite
    YTD
    Gross: 30,196
    Tax Payable: 30,196
    Tax: 6,445

    Hope this helps.
  • chrisbur
    chrisbur Posts: 4,263 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    edited 23 October 2015 at 9:49AM
    djwood1 wrote: »
    YTD
    Gross: 30,196
    Tax Payable: 30,196
    Tax: 6,445

    Hope this helps.

    Your earnings are somewhat higher than I estimated from your first post, I assume that your old employment was either a higher basic than your new employment or you received bonus there as well. The tax code of 824T is not being applied on a month 1 basis. I assume you know why this tax code is being used.

    Regarding tax your earnings so far this year, assuming 824T is your correct tax code put the tax figure of 6445 as being the correct tax. The following figures have been rounded a bit and assume your last payment was for month 7.
    £30196 less £4812 (7/12 of £8249 tax free allowance) = £25384
    Of this £18541 is at 20% = £3708 and the rest £6843 is at 40% =£2736
    £3708 = £2736 = £6444

    Tax Your earnings are well into the 40% tax band so tax on your bonus is all at 40% £1722
    National insurance Your earnings before the bonus are close to the upper earnings limit ( this is the point where NI changes from 12% deduction to 2% deduction) so quite a bit is at 2% but about £135 at 12% £100
    Student loan at 9% £387
    £4304 - £1722 - £100 - £387 = £2095

    So assuming 824T is your correct tax code, you are on month 7 and you have no other income then all looks correct.
  • agrinnall
    agrinnall Posts: 23,344 Forumite
    10,000 Posts Combo Breaker
    chrisbur wrote: »
    Your earnings are well into the 40% tax band so tax on your bonus is all at 40% £1722
    Your earnings before the bonus are close to the upper earnings limit so quite a bit is at 2% but about £135 at 12% £100
    Student loan at 9% £387
    £4304 - £1722 - £100 - £387 = £2095

    For the sake of clarity the highlighted bit of chrisbur's post refers to National Insurance.
  • chrisbur
    chrisbur Posts: 4,263 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    agrinnall wrote: »
    For the sake of clarity the highlighted bit of chrisbur's post refers to National Insurance.

    Yes very good point have edited post to make this clearer.
  • redpete
    redpete Posts: 4,738 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    djwood1 wrote: »
    Being really simplistic here.....my basic per month is £3350 which amounts to £550 tax deductions.

    My total net for this month was £7600 so roughly double so I imagined the tax to be circa £1100-1400, not £2200.

    It's probably a lot more complicated than than!
    Some of the £3350 won't be taxed because of your monthly allowance, some will be taxed at 20%, then the rest (if it's enough) will be taxed at 40%. None of the bonus will benefit from the monthly allowance and all of it will be taxed at the marginal rate, if you are already in the 40% bracket then it will all be taxed at 40%. (I've not checked the figures to see if £2200 is correct but just pointing out the principle.)
    loose does not rhyme with choose but lose does and is the word you meant to write.
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