Mysterious Tax rebate on pay slip this week

rodp_2

Hi All,

I have a payslip question. I am working a short term contract (8 weeks to start with). I'm keeping a timesheet recording the hours I pay. As it's a short term contact, I am on the recruitment agencies books and being paid through a company called RACS. This is a PAYE method of payment. I started 1/11/18 but was working (full time, permanent) at another company up until end September and had a short break between the end and starting this job. I am being paid weekly and am very new to this style of payment as I've always been paid monthly. I received my first full weeks salary yesterday and on the payslip there was a 'PAYE Tax' section which was under the additions section of the balance meaning I was receiving a rebate. I wasn't expecting this and it was worth about double my normal take home pay!! Can any one explain this?

One idea I had was, my annual salary in my previous role was about £6-7K more than what I'm on now. Would that drop in salary plus having a 4 week break, result in this rebate as the annual salary will in hindsight be lower?

Previous annual gross salary £39k. I was made redundant end September and in addition to my severance package received 3 months notice payment. Salary now approx £33k pa gross (i say approx because I'm on hourly pay.

Thanks in advance for your guidance.

Rodp

theoretica

Did the notice pay tip you into the higher tax bracket?

rodp_2

theoretica wrote: »

Did the notice pay tip you into the higher tax bracket?

Hi theoretica,

No, my tax code is still the same (1254M).

Thanks

Rodp

Brynsam

rodp wrote: »

One idea I had was, my annual salary in my previous role was about £6-7K more than what I'm on now. Would that drop in salary plus having a 4 week break, result in this rebate as the annual salary will in hindsight be lower?

I think you've answered your own question!

agrinnall

rodp wrote: »

Hi theoretica,

No, my tax code is still the same (1254M).

Thanks

Rodp

That's not an answer to the question, your tax code has nothing to do with the rate of tax you pay (at least, not until you start to earn a great deal more than it appears you do).

rodp_2

Brynsam wrote: »

I think you've answered your own question!

Does everyone else agree with that too or have I perhaps missed something. If there was likely to be any tax rebate, I always thought that it would be delivered at the end of the tax year (still I'm not complaining!!)

If this is the case, what happens with the scenario that after 8 weeks I then get a different job which then pays £45K for the rest of the tax year (ie still just in the 20% tax threshold), which would then offset the short term dip in salary taking my annual salary back up to what is was first estimate to be (ie before I was made redundant)? Would they then take the money back in one big lump sum (ie less net salary) if the fund are there or would they be more inclined to waiting until the end of the tax year and then send me a bill!

Is there any particular document I can read up on these sorts of scenarios?

I would also like to understand how they calculated the rebate. Is there some documentation on that too?

Many thanks

Rodp

chrisbur

rodp wrote: »

Does everyone else agree with that too or have I perhaps missed something. If there was likely to be any tax rebate, I always thought that it would be delivered at the end of the tax year (still I'm not complaining!!)

If this is the case, what happens with the scenario that after 8 weeks I then get a different job which then pays £45K for the rest of the tax year (ie still just in the 20% tax threshold), which would then offset the short term dip in salary taking my annual salary back up to what is was first estimate to be (ie before I was made redundant)? Would they then take the money back in one big lump sum (ie less net salary) if the fund are there or would they be more inclined to waiting until the end of the tax year and then send me a bill!

Is there any particular document I can read up on these sorts of scenarios?

I would also like to understand how they calculated the rebate. Is there some documentation on that too?

Many thanks

Rodp

The PAYE system is designed to deduct exactly the amount of tax that you owe on each occasion that you are paid. It calculates what you owe at the date of payment and this is compared with what you have paid before this payment is made. If you now owe more than you have paid then the difference is the tax you have deducted from that payment. If you now owe less than you have paid then the difference is returned to you as a tax rebate.
As each week or month of the tax year passes the amount you can earn before tax is deducted increases so if you have a period when you earn nothing you have a build up of tax free allowance which will result in some sort of reduction in your tax when you restart earning, this could be enough to give you a tax rebate.
To know whether your tax rebate is correct you would need to give the following details from your payslip on which the rebate occurred
Taxable gross
Tax rebate
Week number or payment date
Taxable gross to date
Tax paid to date

Then from your P45
Earnings to date
Tax paid to date

rodp_2

Hi Chrisbur,

Thanks for the reply and I'll progress this but firstly, I've had to raise another issue with the Paye company. They are adding the holiday payment onto my base hourly rate but rounding it off (down) before multiplying it by my hours, meaning that I'm not actually being paid my base salary. All be it only a few pennies but this can all add up so I need to sort this out first.

Will come back once I've got over this hurdle.

Thanks

Rodp

Wyndham

I've had gaps in employment, and always look forward to the rebate in my first pay for a new job. I think the gap, and the salary cut, do probably explain it.

I'd also advise that you double check at the end of the tax year. Take your taxable income, take off your tax allowance, then check that the figure you're left with is the amount you've actually paid. Though worth saying it may be more complicated than that, as certain things (such as pension contributions) don't count as 'taxable pay', so you don't include those.

chrisbur

rodp wrote: »

Hi Chrisbur,

Thanks for the reply and I'll progress this but firstly, I've had to raise another issue with the Paye company. They are adding the holiday payment onto my base hourly rate but rounding it off (down) before multiplying it by my hours, meaning that I'm not actually being paid my base salary. All be it only a few pennies but this can all add up so I need to sort this out first.

Will come back once I've got over this hurdle.

Thanks

Rodp

One thing I forgot to ask. did you have any taxable benefit between jobs eg unemployment benefit? If so was your first job P45 handed in to jobcentre and jobcentre P45 to new employer?