Changing to a job with a lower wage, tax qusetion

Alioski

Hi I’m not sure if I’m on the thread for this, due to circumstances I am likely to be changing employment, due to what’s available at the minute I would most likely have to take a wage decrease of around 4000 or so.

If I switched right now would my tax still be the same as it is on my higher wage for the next few month? Also would my NI, pension, student loan etc be on the same higher band for a while or would they reduce straight away, sorry if this has been asked before or if it’s a daft question, I just couldn’t really find anything on google .

Browntoa

It should automatically even itself out on PAYE.

Worst case you can ring them after a couple of months and they do a manual update

getmore4less

All except the tax should adjust to the new levels quickly once HMRC has been updated.

Tax works slightly differently.

On the higher wage you would pay more tax than the lower wage.
As the new total tax for the year will go down from the predicted tax your tax will be less than the new norm till you catch up

This means that once sorted the new take home will be lower than the initial lower pay

It won't be much probably less than £25pm if every thing is in the 20%

You have already paid the tax due on the 1/3 of the £4k which would work out at around £23pm over the year
The new tax level will be £67pm lower as you have a built in overpayment of £23pm that tax reduction should start around £90pm lower

(This will be adjusted for any payments that are from gross that came out of the £4k)

chrisbur

getmore4less wrote: »

All except the tax should adjust to the new levels quickly once HMRC has been updated.

Tax works slightly differently.

On the higher wage you would pay more tax than the lower wage.
As the new total tax for the year will go down from the predicted tax your tax will be less than the new norm till you catch up

This means that once sorted the new take home will be lower than the initial lower pay

It won't be much probably less than £25pm if every thing is in the 20%

You have already paid the tax due on the 1/3 of the £4k which would work out at around £23pm over the year
The new tax level will be £67pm lower as you have a built in overpayment of £23pm that tax reduction should start around £90pm lower

(This will be adjusted for any payments that are from gross that came out of the £4k)

This is only sort of true under certain circumstances, which depends on the level of earnings before and after the change. The OP has not given these details so it is impossible to predict exactly what the affect of this change will be.
Assuming that the OP is on a cumulative tax code and changing jobs has no affect on the tax code.

If the OP currently pays tax at 20% and after the change still pays at 20% then tax will be correct right away. There will be no adjustment as suggested above.
If however the OP is currently in the 40% tax band and the reduction causes their monthly earnings to now be in the 20% tax band only then there will be some ongoing adjustment. There will now be unused 20% tax band allowance which will result in some 40% tax being converted to 20% tax so giving a reduction in the "normal" tax figure for these earnings. This will continue until either the tax year ends or all 40% tax paid is adjusted.
If they were paying 40% and after the change are still paying 40% then again there will be no ongoing adjustment, tax will be correct right away.

It is only if the earnings result in a change to the tax bands that
there will be any ongoing adjustments to the tax figure.

If the OP wants to give exact figures then a better answer can be given.

General_Grant

Alioski wrote: »

. . .

If I switched right now would my tax still be the same as it is on my higher wage for the next few month? Also would my NI, pension, student loan etc be on the same higher band for a while or would they reduce straight away, sorry if this has been asked before or if it’s a daft question, I just couldn’t really find anything on google .

NI is paid in relation to each weekly or monthly pay period's payment. So that changes immediately.

Pension contributions depend on the individual scheme operated by the company. So could increase if they join the pension scheme straight away and it requires a higher percentage to be paid in.

Student loan is per payment too, with weekly or monthly thresholds and is on a percentage basis above the threshold. So this would decrease.

Alioski

Thank you for your answers and help

Sorry if it was a bit vague , but if it helps with actual figures it would be a drop from around £24000 to roughly £19000/20000

Dazed_and_confused

You won't notice any real difference.

You were paying 20% tax on the bit of the higher salary which gets taxed.

You will still be paying 20% tax on the bit of the lower salary which gets taxed.

All that is different is you will be paying less tax due to the lower salary. There is often a hiccup in the first month you are paid by your new employer as you may be paid twice in the same tax month, once by your old employer and then again by your new employer. So you should pay more tax than normal at the new employer (often 20% on the whole wage).

But once that's out of the way it should settle down and all you will notice is a little less tax because you are earning a little less.

This all assumes you are on the emergency tax code of 1250L on a cumulative basis.