New Job, No Tax Being Deducted

siblades

Hi all,

Apologies if this is the wrong section.

My last job ended in March 2018 (last tax year). I then went travelling for a bit and returned to England to start a brand new job in July 2018 (new tax year).

I've now been paid twice, and on my payslips I can see that both times I have not had any income tax deducted from my earnings.

National Insurance, Student Loan repayments and pension deductions are all coming off as normal, but no income tax.

I queried this with my accounts department and they said that this is because I have not yet earned over my personal allowance, and tax will not start being deducted until I have earned this amount. They said that they could not apply the P45 I provided them with as it was from the previous tax year, and this job is my first job this tax year.

Is this correct? I thought they looked at how much you are due to earn over 12 months and started deducting tax right away?

My tax code on my payslips is 1185L and I am a basic rate tax-payer. I don't want to be hit with a tax bill further down the line if I should have started paying tax already.

Any advice would be appreciated.

Thanks

PasturesNew

Sounds correct.

New tax year started in April - and you get roughly £1k/month tax free. By the end of August you are starting with April's, May's, June's, July's and August's tax free allowances = about £5k.

By the end of September you won't be due to pay tax until you've earnt over £6k or so since the beginning of April.

By the end of October you won't be due to pay tax until you've earnt over £7k or so since the beginning of April.

NineDeuce

PasturesNew wrote: »

Sounds correct.

New tax year started in April - and you get roughly £1k/month tax free. By the end of August you are starting with April's, May's, June's, July's and August's tax free allowances = about £5k.

By the end of September you won't be due to pay tax until you've earnt over £6k or so since the beginning of April.

By the end of October you won't be due to pay tax until you've earnt over £7k or so since the beginning of April.

This isnt right. If your salary is higher than the personal allowance, you should be billed with tax immediately

PasturesNew

NineDeuce wrote: »

This isnt right. If your salary is higher than the personal allowance, you should be billed with tax immediately

How many people earn enough in, say, August alone to have to pay tax? You'd have to be earning more than about £5k in one month to do that!

I bet "most people" take home <£2k/month... so it'd take a few months to catch up between "how much you've earnt to the end of X month" and "how much tax free allowance has built up to the end of X month".

If the OP hd earnt £5k in July and £5k in August, they'd have earnt £10k this tax year and have built up £5k tax free allowance, so they'd have seen tax kick in (unless pension contributions and any other sacrifices knocked it back a bit).... but I bet the OP's still hovering around earnings of <£5k to date.

NineDeuce

PasturesNew wrote: »

How many people earn enough in, say, August alone to have to pay tax? You'd have to be earning more than about £5k in one month to do that!

I bet "most people" take home <£2k/month... so it'd take a few months to catch up between "how much you've earnt to the end of X month" and "how much tax free allowance has built up to the end of X month".

If the OP hd earnt £5k in July and £5k in August, they'd have earnt £10k this tax year and have built up £5k tax free allowance, so they'd have seen tax kick in (unless pension contributions and any other sacrifices knocked it back a bit).... but I bet the OP's still hovering around earnings of <£5k to date.

It is done that way for precisely the reason that the OP alludes to - so that you dont have a large tax bill towards the end of the year.

This is completely standard.

Everybody is taxed on the basis that they will earn that amount for the rest of the year. If this turns out to be an overpayment, then HMRC can refund the worker at a later date.

TBagpuss

Did you earn enough to pay tax last year? It sounds as though your employer has not set this up s they should.

Can you use https://www.uktaxcalculators.co.uk/ of something to work out how much tax should be deducted and set that aside. That way, if they then start deducting higher mounts later in the year, you can dip into those savings, and if not, you can contact HMRC for advice and be in a position to pay when necessary.

LilElvis

NineDeuce wrote: »

This isnt right. If your salary is higher than the personal allowance, you should be billed with tax immediately

Pasturesnew is correct. No X suffix on the tax code means that the tax allowance is divided over the year - either weekly or monthly. Tax will be payable when their cumulative (year to date) taxable earnings exceed their cumulative tax free allowance.

chrisbur

NineDeuce wrote: »

It is done that way for precisely the reason that the OP alludes to - so that you dont have a large tax bill towards the end of the year.

This is completely standard.

Everybody is taxed on the basis that they will earn that amount for the rest of the year. If this turns out to be an overpayment, then HMRC can refund the worker at a later date.

Sorry but you have no idea how PAYE works.
Assuming your tax code is being applied on a cumulative basis which appears to be the case here.
There are no assumptions made regarding future earnings; you are always taxed on the basis of what tax you owe at each payday. This way as the tax year progresses tax will self correct itself month by month (or week by week if paid weekly) and at the tax year end if you are on the correct code your tax will be correct. Technically some will very slightly under-pay but unless you have to fill in a tax return HMRC will ignore that, it's just the way PAYE works so that no one over-pays.
If you want to check the exact figure you can earn as at month 5 Aug 6 to Sep 5 paydays you can look it up in table A here....
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/503683/Tax_Tables_A__2016-17__12_15.pdf

It is £4941.30 anyone earning less than that as at month 5 will pay no tax.

This does of course assume that the OP's tax code is correct, which will be the case if they have no adjustments that should be on it eg tax owing from past or some taxable benefit.

LilElvis

TBagpuss wrote: »

Did you earn enough to pay tax last year? It sounds as though your employer has not set this up s they should.

Can you use https://www.uktaxcalculators.co.uk/ of something to work out how much tax should be deducted and set that aside. That way, if they then start deducting higher mounts later in the year, you can dip into those savings, and if not, you can contact HMRC for advice and be in a position to pay when necessary.

Their earnings last year are irrelevant to the current tax year. The employer hasn't done anything wrong - they have applied a standard, cumulative tax code. The OP will start paying tax when their YTD taxable pay exceeds their YTD tax free allowance. Student loan repayments, NI and pension contributions are based on the individual pay period rather than cumulative earnings.

LilElvis

NineDeuce wrote: »

It is done that way for precisely the reason that the OP alludes to - so that you dont have a large tax bill towards the end of the year.

This is completely standard.

Everybody is taxed on the basis that they will earn that amount for the rest of the year. If this turns out to be an overpayment, then HMRC can refund the worker at a later date.

Totally 100% incorrect.

NineDeuce

chrisbur wrote: »

Sorry but you have no idea how PAYE works.
Assuming your tax code is being applied on a cumulative basis which appears to be the case here.
There are no assumptions made regarding future earnings; you are always taxed on the basis of what tax you owe at each payday. This way as the tax year progresses tax will self correct itself month by month (or week by week if paid weekly) and at the tax year end if you are on the correct code your tax will be correct. Technically some will very slightly under-pay but unless you have to fill in a tax return HMRC will ignore that, it's just the way PAYE works so that no one over-pays.
If you want to check the exact figure you can earn as at month 5 Aug 6 to Sep 5 paydays you can look it up in table A here....
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/503683/Tax_Tables_A__2016-17__12_15.pdf

It is £4941.30 anyone earning less than that as at month 5 will pay no tax.

This does of course assume that the OP's tax code is correct, which will be the case if they have no adjustments that should be on it eg tax owing from past or some taxable benefit.

Well I have been working for over 15 years and this is how it has been done for myself and just about every other colleague of mine throughout my whole working history whether it be on temporary or permanent contracts.

If you were to use a reputable salary calculator e.g. https://www.thesalarycalculator.co.uk/, then the default assumption is that your taxes are deducted exactly as I have stated, so please dont tell me that I have no idea how PAYE works.

I am aware that there are other tax codes and you can be nitpicking as you like about that. However, one is right to assume that they would pay tax from day one if they are over the personal allowance.