Tax treatment for first job

bea.watts1

Hi everyone,

I have a question I am hoping someone can answer!

I am starting my first job in August (yay!). I am trying to do some financial planning but I am a bit confused about how my salary will be treated for tax purposes in my first year.

As I start in August I am missing the first 4 months of the year (and haven't earned anything in that time). Given that, how will my salary be taxed? I can see three options:

A) for the remainder of my first financial year I am taxed a lower amount on my monthly pay cheque which takes account of the four months I wasn't working.

I am taxed based on my full annual salary, which means I will overpay, but will then get a tax rebate at the end of the 2019/20 tax year.

C) some option I haven't considered!

If anyone knows the answer to this that would be very helpful.

Thanks!

Dazed_and_confused

Sort of A. Or C.

You will be taxed in the same as everyone else.

Providing you complete a new starter declaration with your employer (you can probably have a look at this on gov.uk) and can sign statement A them you will be put on the emergency tax code on a cumulative basis.

This means you will get £1042 of your tax free allowance each month so the first time you get paid in this tax year you can earn £5,212* before any tax is deducted.
* I'm assuming monthly pay and a first payday in the month to 5 September 2019.

Move on a month and the £5,212 becomes £6,254 and so on.

So you could have several months pay before you exceed your accumulating Personal Allowance and actually have any tax deducted.

xylophone

https://forums.moneysavingexpert.com/discussion/5873297/joining-job-halfway-through-tax-year

https://www.taxguideforstudents.org.uk/working/employed/first-time-workers

unholyangel

Dazed_and_confused wrote: »

Sort of A. Or C.

You will be taxed in the same as everyone else.

Providing you complete a new starter declaration with your employer (you can probably have a look at this on gov.uk) and can sign statement A them you will be put on the emergency tax code on a cumulative basis.

This means you will get £1042 of your tax free allowance each month so the first time you get paid in this tax year you can earn £5,212* before any tax is deducted.
* I'm assuming monthly pay and a first payday in the month to 5 September 2019.

Move on a month and the £5,212 becomes £6,254 and so on.

So you could have several months pay before you exceed your accumulating Personal Allowance and actually have any tax deducted.

Genuinely curious....is there a reason you're referring to a cumulative code (especially a 1250L one) as an emergency tax code?

chrisbur

unholyangel wrote: »

Genuinely curious....is there a reason you're referring to a cumulative code (especially a 1250L one) as an emergency tax code?

The emergency tax code (which is currently 1250L )can under different circumstances be applied on a cumulative or non-cumulative basis.

The GOV.UK site of course says
"If you’re on an emergency tax code your payslip will show:

1250 W1
1250 M1
1250 X"

This is the GOV.UK site over-simplifying things to the point of being mis-leading as it often does.
It should have an L
These are only some of the ways that different payroll programs show non-cumulative emergency tax codes
The emergency tax code is not always applied non-cumulative

unholyangel

chrisbur wrote: »

The emergency tax code (which is currently 1250L )can under different circumstances be applied on a cumulative or non-cumulative basis.

The GOV.UK site of course says
"If you’re on an emergency tax code your payslip will show:

1250 W1
1250 M1
1250 X"

This is the GOV.UK site over-simplifying things to the point of being mis-leading as it often does.
It should have an L
These are only some of the ways that different payroll programs show non-cumulative emergency tax codes
The emergency tax code is not always applied non-cumulative

A cumulative code is a standard code though, especially a 1250L. Thats not to say it couldn't be wrong, but its not an emergency tax code like non-cumulative ones.

Those are used because theres an oddity - such as being unsure if another employer has given you personal allowance or how much, what you've earned/paid in tax so far, you've underpaid during that current year etc. There are unknowns and thus, emergency tax code.

Dazed_and_confused

The "emergency" bit is really just the way the tax code is used.

The emergency tax code is 1250L.

Operated on a non-cumulative or week1/month1 basis.

unholyangel

Dazed_and_confused wrote: »

The "emergency" bit is really just the way the tax code is used.

The emergency tax code is 1250L.

Operated on a non-cumulative or week1/month1 basis.

This is my point though. The emergency is because your employer is unsure what is the correct tax code. They need a code to process payroll but cannot process payroll without a code.

If statement A is used correctly then that would be the correct code for the employer to use for the first wage.

If statement B is used correctly, it may not be the correct code for the employer to use so hence the emergency.

It is only non-cumulative codes that are emergency tax codes. Again, it not being an emergency tax code doesn't mean its not potentially wrong. They really should just call it a temporary tax code but that would likely cause confusion because technically, all tax codes are temporary.

bea.watts1

That's a really clear explanation! Thanks for your help!