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

badmemory

Have you worked out how much tax you should pay for the full year? Have you worked out how much tax you SHOULD be paying each month going forward. There is absolutely no point in panicing until you are sure of those figures. Have you done these figures?

neilio

badmemory wrote: »

Have you worked out how much tax you should pay for the full year? Have you worked out how much tax you SHOULD be paying each month going forward. There is absolutely no point in panicing until you are sure of those figures. Have you done these figures?

Yes, see my post above from 25-09-2018 at 6:08pm in response to you. I believe HMRC is correct in taxing me this much. What I am querying today is if HMRC will accept a lump sum payment from me now to bring me back to a normal tax code.

badmemory

Apologies - I am having a bad few days. You could try asking them to put you on a cumulative tax code, although I am not sure they will do that, there are other implications though (more later). I am sure they will not accept an in-year payment of tax though when you are PAYE.


The implications of using a normal code when you owe so much :-


They can only take half your pay in tax. This means that say for the sake of arguement that your gross pay is £3000/m, they can only take £1500 in tax. This then means that your next months pay will be affected too.


Let us all remember that tax isn't supposed to be taxing - yes right well!


I don't know much about the personal tax account but is it possible to use that to change the code to a more normal one (remember your health ins though).

sheramber

You could out the lump sum that you want to pay into a separate bank account and use that to top up your monthly income with an amount equal to the extra tax being taken off.

chrisbur

neilio wrote: »

For a month, yes. But going forward for six more months, I'd be bringing home net £300 less than my old job each month even though my salary has increased. I had expected a net increase in monthly income of £200(ish) when I changed job and had budgeted for this accordingly. So in actual fact I am £500(ish) worse off every month than I was expecting and have other financial commitments in place to suit that expectation which have now become unaffordable.

I have been having a look back over this thread and came across something you posted some time ago and which I warned off in post 45.
You said in post 20 "I contributed 2.4% to my pension at my old job and my employer contributed 3%. At my new job, I have opted to contribute 10% while my employer also contributes 10%"

You have had a salary increase from 5576.66 to 5868.33 which is 5.23%.
You have increased your pension contribution from 2.4% to 10%.
You expected to be £200 ish better off.
By my rough calculation your net pay in your new job is going to be lower than in your old job ignoring the extra tax being deducted at the moment.

neilio

chrisbur wrote: »

I have been having a look back over this thread and came across something you posted some time ago and which I warned off in post 45.
You said in post 20 "I contributed 2.4% to my pension at my old job and my employer contributed 3%. At my new job, I have opted to contribute 10% while my employer also contributes 10%"

You have had a salary increase from 5576.66 to 5868.33 which is 5.23%.
You have increased your pension contribution from 2.4% to 10%.
You expected to be £200 ish better off.
By my rough calculation your net pay in your new job is going to be lower than in your old job ignoring the extra tax being deducted at the moment.

This isn't quite correct. Those figures I specified are not my gross salaries, they are inclusive of other allowances upon which my pension contributions are not based. My base salary has actually reduced but I have greater allowances now so my gross income has increased.

To be more clear, I'll outline here:

Old job:
Gross salary: £5493.33
Allowance: £83.33
(Pension 2.4% of 5493.33 = £131.84)
TOTAL: £5444.82

New job:
Gross salary: £5166.66
Allowance #1: £493.33
Allowance #2: £208.33
(Pension 10% of 5166.66 = £516.67)
TOTAL: £5351.65

So, yes, I see now, there is a decrease here. The reason I must've overlooked this when I accepted the new job was because (i) The gross figure not including pension deductions is an increase, and (ii) I hadn't yet opted on the amount I'd contribute to my pension. So
I have messed up somewhat. I can adjust my pension contribution, even down to 8% would make my income a marginal increase.

I'm so annoyed at myself for this oversight, but still even more annoyed about the tax situation right now.

chrisbur

neilio wrote: »

This isn't quite correct.

I'm so annoyed at myself for this oversight, but still even more annoyed about the tax situation right now.

Not sure which part you feel "isn't quite correct" as you have used the same figures that I used and have come to the same conclusion that you are going to have a lower net pay. Though actual amount may vary a bit depending on how tax relief is given for each pension.

Being annoyed is not going to help, you need to reduce your outgoings. Look at other parts of this site to see if you can save money, do a proper budget to see where your money is going and can you change something to save money.
You should be aiming at reducing your outgoings to eventually enable you to save more. Life has a habit of suddenly throwing up something expensive and you need savings to be prepared for this.

00ec25

neilio wrote: »

I'm so annoyed at myself for this oversight, but still even more annoyed about the tax situation right now.

so your pension contribution is +3 times more than your old job in exchange for a gross pay reduction of only £90, yet you think you are being hard done by on the pay and tax front?
When you retire you will be eternally grateful for that extra, and will wonder why you made such a fuss

if you really cannot manage on £90 per month less with a >£5000 per month income it rather makes one wonder why you are "worth" such a pay level if you cannot manage a budget on such an income

neilio

00ec25 wrote: »

so your pension contribution is +3 times more than your old job in exchange for a gross pay reduction of only £90, yet you think you are being hard done by on the pay and tax front?
When you retire you will be eternally grateful for that extra, and will wonder why you made such a fuss

if you really cannot manage on £90 per month less with a >£5000 per month income it rather makes one wonder why you are "worth" such a pay level if you cannot manage a budget on such an income

You are conflating two issues here. Have you read the entire thread? The main complaint here is the different payday cycles and job change resulting in an “extra” month of pay meaning I am getting hit by £300 less every month thanks to HMRC. The issue of pensions contributions I only really realised yesterday and is not the big issue here right now, because I can adjust that if necessary. Perhaps you should not be so rude, we all have budgets, everything is relative.

neilio

chrisbur wrote: »

Not sure which part you feel "isn't quite correct" as you have used the same figures that I used and have come to the same conclusion that you are going to have a lower net pay. Though actual amount may vary a bit depending on how tax relief is given for each pension.

Being annoyed is not going to help, you need to reduce your outgoings. Look at other parts of this site to see if you can save money, do a proper budget to see where your money is going and can you change something to save money.
You should be aiming at reducing your outgoings to eventually enable you to save more. Life has a habit of suddenly throwing up something expensive and you need savings to be prepared for this.

The “isn’t quite correct” part was that I hadn’t broken down the salaries from the allowances so, in actual fact my pension now is something like 8.X% of my gross including allowances, which is 10% of the base salary then allowances added on top. That’s what I was referring to.

Yes, I know all about saving(!!). One thing I’ve learned about this forum over the years is that one really does need to divulge all kinds of information in order for people to understand. So here it goes. I had about £20,000 in savings up until around 2 years ago, but thanks to some family illnesses and other crises, these funds had depleted over time. I am not a frivolous spender and nor is my partner.

We have a mortgage and recently remortgaged to release some equity to do some debt consolidation. My mortgage repayments this month have increased by £400 a month (£200 each, my partner and I). My new job came along at the right time to meet this, or so I thought. So while I am trying to save, turns out HMRC has other ideas for the time being. So there you go.

Thank you for all your help on this thread to those who have been helpful, it is much appreciated, but you are preaching to the converted when it comes to saving. I guess I didn’t realise I had to divulge all of this before I start a thread asking for advice on why this tax situation has happened. I’d have been ok with making the same amount of money as my old job if that was going to be the case. All this traces back to my old job payday being the 6th of the month!