Tax code following redundancy?

p00hsticks

am123 wrote: »

Molerat - My new employers did have my P45 and HMRC confirmed they received it on 23/09/19 when I spoke to them.

So it's only a week since HMRC got your P45 ?

When was your payslip containing the NONCUM code produced ?

I'm a bit out of touch with how employers and HMRC communicate these days, but I'd suspect you might need to allow a bit longer before the contents of the P45 are reflected in a tax code appearing on your wage slips ....

am123

Yes, at least that’s what HMRC said. I don’t know why they only got it a week ago, I’ve been working at my new place since 10th Sept, but took all my details/P45 to my new employers in July!
My new payslip has today as the actual payday, but was viewable from last Thursday (26/09/19).

chrisbur

Just noticed your pension figure.
It appears that your employer is operating the net pay system so this is deducted before tax is calculated so your taxable pay to date should be your gross less your pension.
If that is correct then your tax deducted here is correct for the emergency tax code of 1250L mth 1
Assuming that your tax was deducted correctly in your old employment ( To check this I need the figures from your P45 part 1A section 7 headed "Last entries on deduction working sheet....") and that your earnings are now going to be typical of your first earnings ie about £550 a week then your new earnings are well below the level for 40% tax.
You will have unused 20% tax band allowance which as the year progresses will be used to convert some of your 40% tax to 20% tax so reducing the amount of tax you pay until either the tax year ends or you run out of 40% tax.

I see your tax code at old job was 1286L this may not apply to your old job it depends if it is affected by something that applied only to your old job so if this is used you may be underpaying tax a little bit.

Just noticed your replies so as I said your taxable pay is after deducting pension
A P50 is a form you can use to claim a tax rebate if you are unemployed and not receiving unemployment benefit.

I think that what you financial adviser was saying was that you would continue to be in the 40% tax band; which you will but the amount due at 40% on earnings of around £550 a week will actually go down as each month passes resulting in your tax being reduced as these 40% taxes are converted to 20% taxes.

PAYE is very good at taking the correct tax as long as you are on the correct tax code.

am123

Wow, thanks for the detailed reply! I’m still not sure I understand it but as long as you think it sounds about right, I’m happy with that!
I’m just going to a physio appt but will get the figures you asked for when I’m back.
As for the 1268 code, would that be because I claim tax relief on my professional registrations? I assumed that would carry over as I still need my registration to do my current job.

chrisbur

am123 wrote: »

Wow, thanks for the detailed reply! I’m still not sure I understand it but as long as you think it sounds about right, I’m happy with that!
I’m just going to a physio appt but will get the figures you asked for when I’m back.
As for the 1268 code, would that be because I claim tax relief on my professional registrations? I assumed that would carry over as I still need my registration to do my current job.

Yes that would be the case so should be no problems there.

am123

Ok, so P45, Part 1A, section 7 says:
Total pay to date £63516.34
Total tax to date £23404.80

chrisbur

Tax code is given as 1286 in the beginning but later as 1268. Could not quite get back to the tax figure you have but only a small difference.

You have paid tax at 40% and at 45%
Each month that passes your tax allowances will increase, in rough round figures you will get an extra £1075 on which you are due to pay no tax and an extra £3120 on which tax is due at 20% and something like £8500 on which tax is due at 40%
It appears that your new earnings are going to be somewhat lower than your average earnings at your old job as well as which you have had one or two months with no earnings so as each month passes some of your 45% tax will become 40% tax and some of your 40% tax will become 20% tax.
You should see the best benefit from this in the first payday after your P45 is applied due to the month or possibly two that you had no pay.
Of course if your pay increases and you had earnings over about £4200 then this would take your monthly earnings back into the 40% band and would cancel out this converting 40% to 20%.
If your pay increases or decreases PAYE will take the tax that is due as at that point in the year, the only exception would be if at the tax year end your taxable earnings were over £100000 then you would loose some of your personnel allowance. You might end up owing some tax then as I have no idea if that would be spotted by HMRC and adjusted before the tax year end or if it would be done after it ended.

am123

That’s amazing, thank you so much for explaining. It’s not at all how I thought tax worked! I guess I hadn’t thought about it being spread over the twelve months, but rather thought it ran consecutively. It’s very confusing to a layperson!
Yes, my new income is significantly lower as I’m only working 24 hours a week as opposed to 37.5 a week I was working in my old job. (I’m doing a degree as well, so took the opportunity to reduce my hours whilst I complete it).