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

neilio

So I have just put my gross annual salary into thesalarycalculator.co.uk and applied the 360LX tax code and it returns the same result as the 1185L tax code, ie: I’d be getting paid the same as what I was originally expecting; which clearly I should have tried before starting this thread, so nothing to worry about or so it seems. HOWEVER, this confuses me even further because if I really am facing a £2000 tax shortfall, why does this new tax code not reflect any additional tax deductions? The tax and NI deductions and net income are all identical!?

NordicNoir

neilio wrote: »

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

Warning....this is very rough and ready!

Effectively, you had used up all of your 0% and 20% bands in your normal monthly pay, and was well into the 40% band. Therefore, the extra months pay for August & September should have all been taxed at 40% but you received another two sets of free pay and 20% band, hence your massive underpayment.

Once your September 30 salary has been paid, you will find out the true amount underpaid and HMRC should recalculate your code. They will take the underpayment back over the remaining tax year, so you are effectively being allowed a delay in the repayment already.

neilio

I just logged in to HMRC and the tax code has changed again since yesterday. Now it says 352LX. That still isn't impacting on my figures on thesalarycalculator.co.uk. What's going on?

Some of you previously have been stating 360L when I'd be stating 360LX. Without the X makes a huge difference for the worse. With the X seems okay. Am I interpreting this correctly?

neilio

MichelleUK wrote: »

They will take the underpayment back over the remaining tax year, so you are effectively being allowed a delay in the repayment already.

It sounds like I'm going to be massively screwed for the next seven months.

NordicNoir

neilio wrote: »

It sounds like I'm going to be massively screwed for the next seven months.

Not really, you were greatly undertaxed in August and September, and they are letting you spread it over seven months.

The underpayment will get worse after 30 September, as HMRC do not yet know about you having two lots of pay in September, as their figures are only based up until your last payday.

HMRC do say that they are open to spreading the tax for vulnerable customers, but I would imagine, on your earnings, it would be unlikely that they adjust it.

https://www.gov.uk/government/publications/issue-briefing-changes-to-our-paye-tax-system/helping-customers-pay-the-right-amount-of-tax-on-time#what-were-doing-to-protect-vulnerable-customers

neilio

MichelleUK wrote: »

Not really, you were greatly undertaxed in August and September, and they are letting you spread it over seven months.

The underpayment will get worse after 30 September, as HMRC do not yet know about you having two lots of pay in September, as their figures are only based up until your last payday.

HMRC do say that they are open to spreading the tax for vulnerable customers, but I would imagine, on your earnings, it would be unlikely that they adjust it.

https://www.gov.uk/government/publications/issue-briefing-changes-to-our-paye-tax-system/helping-customers-pay-the-right-amount-of-tax-on-time#what-were-doing-to-protect-vulnerable-customers

Well, actually, yes really. If my crude calculations are correct, I will be £285 worse off every month. Or are you saying this might not be the case? I still live on a budget, as does my partner, and we still have a mortgage to pay and debts to clear. I went for this job and its higher salary for a reason, but it feels like I’m going in the opposite direction and will be stuck like this for more than half a year. So, yes, really!

NordicNoir

neilio wrote: »

I just logged in to HMRC and the tax code has changed again since yesterday. Now it says 352LX. That still isn't impacting on my figures on thesalarycalculator.co.uk. What's going on?

Some of you previously have been stating 360L when I'd be stating 360LX. Without the X makes a huge difference for the worse. With the X seems okay. Am I interpreting this correctly?

It will change daily as HMRC now keep the codes based on days rather than tax periods (relatively new change by HMRC, but extremely confusing!) but they do not issue it to your employer every day, usually just monthly. A couple of days after 30 Sep, go in and look at it then. That should then show your true underpayment and new tax code.

The X shows whether your tax code is cumulative. No X and your tax is worked out on your year to date earnings in the tax year. An X code works out your tax based on your earnings in that period only. This saves you paying the underpayment back all at once, HMRC can take it gradually over the rest of the tax year.

neilio

Is thesalarycalculator.co.uk a reliable resource? I’m confused that 352LX and 352L return such different results based on my gross salary.

NordicNoir

neilio wrote: »

Well, actually, yes really. If my crude calculations are correct, I will be £285 worse off every month. Or are you saying this might not be the case? I still live on a budget, as does my partner, and we still have a mortgage to pay and debts to clear. I went for this job and its higher salary for a reason, but it feels like I’m going in the opposite direction and will be stuck like this for more than half a year. So, yes, really!

The £285 (I have not checked this figure) each month that you are short was actually paid to you in the final two months pay from your old employer as they undertaxed you! If everyone was using the correct tax codes*, you would have received much less in those two months, so effectively, because of this issue, you have more money in your pocket today than if it had not happened....so stash that aside to cover the future months where you will have less.

Ultimately, you will end up paying the correct amount of tax, but a bit later than you would have, had the payrolls been taxed correctly. Surely that makes you the winner?

* There is no way that HMRC could issue correct tax codes because they only hear about your employment events after they have happened.

neilio

MichelleUK wrote: »

The £285 (I have not checked this figure) each month that you are short was actually paid to you in the final two months pay from your old employer as they undertaxed you! If everyone was using the correct tax codes*, you would have received much less in those two months, so effectively, because of this issue, you have more money in your pocket today than if it had not happened....so stash that aside to cover the future months where you will have less.

Ultimately, you will end up paying the correct amount of tax, but a bit later than you would have, had the payrolls been taxed correctly. Surely that makes you the winner?

* There is no way that HMRC could issue correct tax codes because they only hear about your employment events after they have happened.

Yes, I understand that, and I am not disputing paying what I owe. But I don’t budget that way. When I was getting paid on the 6th of the month it was for the preceding month’s work I had done. I changed job and now payday is the last day of the month for the preceding month’s work I had done. I don’t have any extra money in the sense of the word that you are describing or HMRC thinks I have. It just so happens that there has been an additional payment made to me this tax year because I was paid on the first day of the tax year for employment entirely within the previous tax year. It’s as if the calendar I’ve been working to this year slightly mis-matches HMRC’s tax calendar, and now I’m paying the price, but how was I to know? Ultimately, this is the fault of my former employer and the date they have chosen to pay their staff, only affecting people when they change job, the worse it must get the later into the tax year it is. I dread to think what it must be like for anyone who leaves in, say, February!!