Impact of old job monthly pay schedule affecting tax liability at new job

neilio

I’ve just started a new job and I’ve unexpectedly discovered that I owe HMRC more than £2000 and they are adjusting my tax code for the rest of the year accordingly, meaning I’ll be taking home less money in my new job than my old job, at least until the end of this tax year.

My salary is higher at my new job than the old job, but not so much higher that I was expecting this. This has come about because I have been paid twice in August by my former and current employer applying the same tax code as each other. My former employer’s payday is the 6th of the month and my new employer’s payday is the last working day of the month. I finished my old job on 10 August and started my new job on 13 August. So, during August I got paid a full month’s salary on 06 August and three weeks' salary on 31 August. In fact, September will also impact me because I have just been paid my final week of salary from my previous employer on 06 September and I will be paid a full month by my new employer on 28 September (the 30th is a Sunday).

This is the result my old employer paying their staff on the 6th of the month that I am actually taking home the equivalent of THIRTEEN full months of salary instead of twelve, plus the additional partial payment to cover the transition from one job to another during a month. This current tax year started on 06 April 2018, which was payday for me as I was paid for employment between 06 March and 05 April inclusive, but my payday occurred in a different tax year, resulting in my actually getting paid what looks like a whole additional month of salary this tax year. I’m now paying the price for this. My estimated annual income this tax year is higher (a whole month’s worth higher) than what my actual annual gross salary is because of this. But this is clearly not what is happening in real terms and it is severely impacting my budget.

Is there any way I can get HMRC to change this somehow? It seems incredibly unfair.

badmemory

Are you saying that HMRC have given you a tax code which is non-cumulative? At least that would spread the underpaid tax over the rest of the year. Owing £2k implies that you have had extra earnings of at least £5k. Is that correct?

neilio

Yes, the tax code means the unpaid tax is spread throughout the rest of year, but this reduces my net earnings considerably. Yes, as explained, this has been triggered by being paid twice in August and from my final pay in early September from my previous employer, which means I have had extra gross earnings of around £5000 within the last month - not as result of working two jobs simultaneously but because of changing jobs and moving from one pay schedule to a very different one. When I log on to HMRC online, it correctly states how much gross I've earned from my previous job and accurately estimates how much gross I will earn in my new job within this tax year. But, because of being paid on Day One of this tax year, in total my gross earnings estimate this tax year is approximately £6000 more than what my actual gross annual income really is.

Dazed_and_confused

But, because of being paid on Day One of this tax year, in total my gross earnings estimate this tax year is approximately £6000 more than what my actual gross annual income really is.

You can't have it both ways, you've been paid the money in this tax year so the fact is that's part of your actual income for this tax year.

Presumably if you look at your P60 for 2017:18 tax year it doesn't include the money paid on 6 April 2018. And this will be because its income falling in 2018:19.

agrinnall

neilio wrote: »

But, because of being paid on Day One of this tax year, in total my gross earnings estimate this tax year is approximately £6000 more than what my actual gross annual income really is.

Are you saying that HMRC have extrapolated your earnings for the whole year based on what you earned in month 1, which was exaggerated by being paid twice? If so then you can explain to them that their assumption is incorrect and that your annual earnings will be lower than they have estimated. However, I would be surprised if this is what they have actually done. Perhaps it would be easier to comprehend and advise if you gave us the real figures that have led to your current situation.

neilio

I’m not too sure how else to explain it. Had I not changed job, I’d be paid twelve times during the year, on or around the same date, at the beginning of the month. But because I changed job mid-month in August and my new job pays at the end of the month, I got paid twice in August - once at the beginning of the month from the old job and once at the end of the month from the new job. I will be paid at the end of every month going forward. This equates to thirteen times. I am also being paid a fourteenth time to cover the partial month I worked in the old job.

Think of it this way: During the tax year 2018-19, I am being paid for work I have done from the beginning of March 2018 to the end of March 2019, because of the different times of the month my old and new jobs pay their employees. This is thirteen months, not twelve.

Unexpectedly, which I hadn’t accounted for, HMRC has extrapolated a new tax code from now onwards based on thirteen months of working, after having been earning under a tax code based on twelve months of working which had been the case from April until August when I changed job.

antrobus

neilio wrote: »

....When I log on to HMRC online, it correctly states how much gross I've earned from my previous job and accurately estimates how much gross I will earn in my new job within this tax year....

There you go. HMRC is using the right numbers.

Tax is calculated on earnings in the tax year.

jimmo

Are you sure that HMRC say you owe £2,000? That's not the amount of the Coding adjustment is it?
Being paid twice in the same tax month can cause an underpayment to arise but it shouldn't be anywhere near £2,000.
Where this happens the 2 payments by different employers result in you being granted 2 months worth of coding allowances instead of one.
The Personal Allowance for 2018/19 is £11850 which works out as £988 per month you are allowed to earn tax free. By getting a double allowance you should have underpaid (£988 at 20%) £197.60 if you are a basic rate taxpayer or £395.20 if you are a 40% taxpayer.
If you have underpaid £2000 something else is very wrong. Hence the reason why you are being asked for the actual pay and tax details.

Dazed_and_confused

Although it is quite a large amount the op is a higher earner and maybe the extra salary being received in this tax year has taken them over the £100k threshold so they ended up with receiving two lots of allowances in one month combined with those allowances (or some of them) not even being due?

Or it could simply be the op has misunderstood the underpayment restriction in the code is different to the amount of the underpayment?

neilio

These are gross amounts and the tax codes applied on each payment. For those payments yet to occur, I have simply taken my new annual salary and divided by 12 to extrapolate the monthly gross amounts. I’ve left the tax codes for those blank for now. The tax code that HMRC has applied to me for the rest of the tax year is 360LX.

06/04/18 - £5416.66 - 1211L
06/05/18 - £5576.66 - 1211L
06/06/18 - £5576.66 - 1211L
06/07/18 - £5576.66 - 1211L
06/08/18 - £5576.66 - 1211L
31/08/18 - £4062.69 - 1185L (first pay from new job, covering last 3 weeks of August)
06/09/18 - £2472.07 - 1211L (final pay from old job, includes pay for 5x unused annual leave days)
30/09/18 - £5868.33
31/10/18 - £5868.33
30/11/18 - £5868.33
31/12/18 - £5868.33
31/01/19 - £5868.33
28/02/19 - £5868.33
31/03/19 - £5868.33

Dazed_and_confused

Can you post details of how your new tax code has been calculated?

I think you may have misunderstood the £2,000 element and this could be an adjustment to collect more tax but the tax itself isn't necessarily £2,000.