Confused about PAYE tax

wavefunction

I wonder why do I get charged 20% PAYE tax even at the start of the tax year? They refund it around August time in my case so the money is not lost. But why not start charging it once my earnings reach 12000GBP for the year though? I don’t understand this...

Dazed_and_C0nfused

PAYE is meant to deduct the correct amount of tax evenly throughout the course of the year.

So if you have a tax code of say 1250L you can earn £1,042 each month before you pay any tax.

Who refunds you each August?

wavefunction

Dazed_and_C0nfused said:

Who refunds you each August?

HMRC

bradders1983

Something not right there then. What is your tax code?

As already said it is correct you are charged tax from the start of the year. 

badmemory

CIS???????????

wavefunction

bradders1983 said:

Something not right there then. What is your tax code?

Says 20T on my latest payslip.

bradders1983

The T and 0T codes: for £100,000+ income

For every £2 you earn over £100,000, you’ll lose £1 of your Personal Allowance. At this point you should be put on a T code, preceded by a figure showing the level of allowance you have left, providing any company benefits aren’t forcing you onto a K code.

When your income reaches £123,700, you’ll lose all of your allowance and your whole income will be subject to the appropriate rates of Income Tax. At this point, you’ll be put on a 0T code.

https://www.lovemoney.com/guides/15060/how-to-check-youre-on-the-right-tax-code-2019

Do you earn over £100k, OP?

molerat

T suffix simply means

Your tax code includes other calculations to work out your Personal Allowance

So you are allowed to earn £200 per year or roughly £16 per moth before tax is deducted. Without more detail of your income and what your tax account shows for the make up of the code it is impossible to say what is happening.

wavefunction

bradders1983 said:

Do you earn over £100k, OP?

Not even close. Just started a new job last month, it pays £500 per week.

wavefunction

molerat said:

T suffix simply means

Your tax code includes other calculations to work out your Personal Allowance

So you are allowed to earn £200 per year or roughly £16 per moth before tax is deducted. Without more detail of your income and what your tax account shows for the make up of the code it is impossible to say what is happening.

My tax account(HMRC app) says that my current employment tax code is 1229LX and my tax free amount is £12,500.

wavefunction

Checked some of my previous payslips and the tax code there is 1250L / 1185L.

Is it just me or is this tax system not straightforward to understand? Say I earn ~twice the amount of my tax allowance = £2000 per month. Do they deduct £2000 * 0.2 = £400 tax every month for 12 month, then refund 6 months worth of tax paid at the end of tax year?