Income Tax YTD / Tax Bands

Dazed_and_confused

Even if you were a higher rate payer there is usually no need to claim anything as your employer will usually have ensured you got he correct (maximum) tax relief.

This is by a net pay arrangement where your salary is, say £5,000/month, but you pay 5% into the pension so your taxable pay is only £4,750.

This should show up on your payslips. And it is the taxable pay, not salary, which then goes on your P60.

sgx.saint

Thanks.

My company portal says higher rate tax payers should claim the extra tax relief from HMRC.

I'll email them to clarify.

Would the arrangement you mention affect my tax code?

chrisbur

sgx.saint wrote: »

Thanks.

My company portal says higher rate tax payers should claim the extra tax relief from HMRC.

I'll email them to clarify.

Would the arrangement you mention affect my tax code?

This sounds like your pension contributions are being taken from your net pay; referred to as Relief at Source.

As far as a UK tax payer is concerned they would only claim any tax back if they went into the 40% tax band with the 20% tax being covered by a payment from HMRC to the pension provider. However for a Scottish tax payer seems it gets a bit more complicated as HMRC only pay as if you had paid tax at 20% not 21% so although you are not a higher rate tax payer this year you have paid tax at 21% so are entitled to the 1% back which you can claim.
Details are here....
https://www.gov.uk/government/publications/pension-schemes-relief-at-source-for-scottish-income-tax-newsletter-february-2018/pension-schemes-relief-at-source-for-scottish-income-tax-newsletter-february-2018

sgx.saint

Thanks so much, really helpful.

Do you know why they would take this approach as opposed to gross relief so I don't need to mess around with claiming?

chrisbur

sgx.saint wrote: »

Thanks so much, really helpful.

Do you know why they would take this approach as opposed to gross relief so I don't need to mess around with claiming?

No idea really but which type of scheme you are in can be significant to many lower paid workers.

The Relief at Source can be an advantage for lower paid employees as they can get tax relief on earnings that are too low to pay tax on.
More info here....
https://smallbusiness.co.uk/pension-tax-relief-disparity-among-higher-and-lower-paid-staff-2546248/

Also Scottish tax payers get 20% tax relief on their earnings that they paid 19% tax on.

sgx.saint

Thanks Chrisbur.

Back to my question about my take home salary for the remainder of this financial year, I think I may have cracked this, but can someone confirm.

Here are the results from a salary calculator online, taking into account my annual/monthly salary and all deductions.

https://imgur.com/fMIVgA6

As my annual earnings this year will fall below the Scottish 41% rate can I just remove the 41% tax from that calculation and therefore assume I will be circa £351 a month better off until April at which point I will be paying the 41% tax rate on a proportion of my salary?

Thanks

Dazed_and_confused

That calculation is only telling you what you would pay if you earned £4,587/month. Each month for the whole year. Or if your tax code was being operated on an emergency (non cumulative) basis.

And the standard tax code from April will be S1250L, not S1185L. So the figures would be different next year in any case.

And by your logic that would mean £857/month wouldn't actually be taxed. Why do you think this would be the case?

sgx.saint

I don't really care about next year as that is easy to calculate using the variety of online calculators.

All I need to workout is how much I will receive in net pay (after tax, NI and deductions) each month until April to help me budget for some upcoming events.

My logic? I am here asking for help, not trying to impart advice or logic on others. This is the primary purpose of the forum - to support and help others.

I don't know how to translate the figures from the manual PAYE calculation into the the bottom line of how much I will receive in my bank for the next three months - this is what I need to calculate and I'm finding it difficult.

chrisbur

sgx.saint wrote: »

Thanks Chrisbur.

Back to my question about my take home salary for the remainder of this financial year, I think I may have cracked this, but can someone confirm.

Here are the results from a salary calculator online, taking into account my annual/monthly salary and all deductions.

https://imgur.com/fMIVgA6

As my annual earnings this year will fall below the Scottish 41% rate can I just remove the 41% tax from that calculation and therefore assume I will be circa £351 a month better off until April at which point I will be paying the 41% tax rate on a proportion of my salary?

Thanks

I am not a great fan of tax calculators, sometimes you need to understand how PAYE is worked out to make sense of the results that they give.
You have been earning less than the amount that would result in you paying tax at 41%. Each month the allowance you get on which tax is paid at 21% increases and so you are building up unused allowance at 21%. As your earnings will not take you into the 41% band (I am trusting your calculation on that bit) all the figures in this calculation showing as 41% will be taken at 21%. So the £351.40 will actually be £179.99
When it comes to next year there will be new tax allowances and possibly different bands as has been said but if we were to assume no change then due to your increase in salary you would be in the 41% band and would be paying tax as shown in your calculation so then you would be paying £351.40 instead of £179.99 so tax goes up £171.41 or thereabouts.

It will be different to that of course as rates etc will change. I have no idea off hand what Scotland will be doing so be prepared for it to go up a bit higher than £171.41.

sgx.saint

Thanks Chris.

One question, would the 41% not disappear completely as none of my monthly earnings would be taxed at that amount and the 21% rate has already been applied in the calculation?