Paying tax on universal credit?

Lindsey33uk

Hello guys I wonder if you can help.

I claim universal credit. I have three dependant children and it includes my payment for housing benefit. In September I started working. I earn just under the 12,500 threshold per year.

I am being taxed nearly £160 a month which is 20% Is this because my tax free amount is being taken up by my universal credit? I didn’t realise universal credit was taxable but wondering if my income is now taxable because of my universal credit if that makes sense.

Thank you in advance

Rubyroobs

Universal credit is a benefit. You are probably being emergency taxed in your new job. You need to ring the tax office. It's nothing to do with UC except in the sense that you will be getting extra Uc as you have less net wages. When they refund you the overpaid tax you will get less Uc that month as net wages will be higher if they include it with your wages.

calcotti

Universal Credit is not taxable. If the work you started in September is the first work you have done this year you should not be paying any tax. Your employer relies on HMRC to supply them with the correct tax code to apply to your wages. As Rubyroobs says you need to speak to HMRC to get the correct tax code issued.

Dazed_and_confused

Your employer relies on HMRC to supply them with the correct tax code to apply to your wages

Not initially they don't.

The emergency tax code is currently 1250L. Operated on a non cumulative basis.

This means that no tax would be deducted unless the monthly taxable income was more than £1,042.

What is likely to have happened is that either the op has failed to complete a new starter declaration for the employer or the employer has failed to furnish the op with the requisite forms when they started work. In this situation the employer would operate tax code 0T. Which is not the emergency tax code and for the amount the op is earning it would mean 20% tax was deducted.

The op should check their personal tax account on gov.uk to see if a new tax code has been issued yet and if not contact their employer to understand what has gone wrong. Then armed with that information contact HMRC.

calcotti

Thanks Dazed and ... I was making the more general point that employer relies on HMRC for tax code information but I admit I thought that 0T was the emergency tax code. I also thought all this was supposed to be sorted out more smoothly with RTI!

OP, more information about tax codes here https://www.gov.uk/tax-codes/updating-tax-code

Dazed_and_confused

RTI only helps after the first payment has been made. Upto that point nothing much has changed really, still down to the employer and employee to get things right in the first place

If the emergency tax code had been used, either on a cumulative or non cumulative basis, then no tax would have been deducted in the first place.

calcotti

Just mindful that OP says job started in September so they are more than two months into job.

Lindsey33uk

To be honest I didn’t know there was an amount that I could earn before I paid tax. I am perhaps very naive but thought that I would pay some sort of tax. It was only when I queried how much tax it was with a friend that I realised it probably wasn’t right. I haven’t worked for a long time due to very ill health so this is all new again for me. My tax code is indeed 1250L so believe this must be emergency tax? I have now submitted an enquiry to the HMRC and will speak with my employer tomorrow. Thank you all for your advice!

calcotti

If your tax code is 1250L you should not be having 20% of your earnings deducted.

Dazed_and_confused

And should have had a refund of the tax deducted from your first salary payment.

Have you got your payslips to hand?

Can you check your October and November payslips to see if the £160 has now been refunded by your employer?

calcotti

Dazed_and_confused wrote: »

The emergency tax code is currently 1250L. Operated on a non cumulative basis..

I thought a tax code with L on the end was a cumulative tax code.