Tax calculation question

himalshelat

I recently started a new job. My pay is 45000/year. I started on 1st July and was not paid in July. On Aug 6th which was the pay day I was paid for two months. This comes to 7500 before tax and pension. They have paid me 5070 after tax. They seem to have applied tax calculation for a higher rate taxpayer. My take home pay should have been 5706 (2853*2) according to tax calculators online. 
Is this a mistake by my Employer, by HMRC or is this the way things are done and I will eventually get back the money somehow?
Thanks for reading.

Savvy_Sue

Yes, if HMRC think your normal monthly pay is twice what it is, you will look like a higher rate taxpayer, and it will settle down in a month or two. That's not necessarily a mistake by your employer - although it's unusual to be paid for a whole month so early in the month! (We pay on 25th for the whole calendar month.) Will you be paid for all of September on 6th September? I would check that with them. 

However, you should check what tax code was used, and whether that appears to be correct. 

molerat

£7500 on a 1250M1 tax code comes to £5070.54 net after tax and NI so I suspect that is the tax code used.  Did you give the employer your P45 from the previous job and what tax code was used on the pay slip ?

chrisbur

Looking on the bright side. 
As molerat has said code 1250L month 1 appears to have been used and your two wages treated as one month. This has resulted in you paying extra tax of around £874 assuming that your code should be 1250L cumulative and there is no overlap of tax months with any old employment.  Whatever your tax should be it will be adjusted when either your P45 is applied or if you do not have one or that is non-cumulative when HMRC issue your tax code and details. 
As a result of treating this payment as only one month's salary you have under-paid national insurance by about £238 
Your tax will be corrected, your NI will almost certainly never be noticed.

himalshelat

The tax code on my payslip is 1250L m1. Do employers calculate this? Or do they put in what they get from HMRC? I have not provided them with a P45. I think I may have misplaced it.

Also an interesting thing I observed when I login to HMRC website I see the following in the Estimate your income tax for 2020/2021 section
Pay in previous employment = 11600
Estimated Pay in current employment = 45000
Estimated pay you will earn this year = 56600
They then go on estimating that I will have to pay some tax at the higher rate. This is a very bad estimate. I will not earn 45000 this year in my current job. 

chrisbur

himalshelat said:

The tax code on my payslip is 1250L m1. Do employers calculate this? Or do they put in what they get from HMRC? I have not provided them with a P45. I think I may have misplaced it.

Also an interesting thing I observed when I login to HMRC website I see the following in the Estimate your income tax for 2020/2021 section
Pay in previous employment = 11600
Estimated Pay in current employment = 45000
Estimated pay you will earn this year = 56600
They then go on estimating that I will have to pay some tax at the higher rate. This is a very bad estimate. I will not earn 45000 this year in my current job. 

This tax code is the emergency tax code, it is used by all employers if the new employee does not provide a P45 and they make a starter declaration that either this is their only job or it is their first job this tax year.  Only job gets you 1250L on a week 1/month 1 basis as in your case and first job gets you same code but on a cumulative basis.  Usually shown as three choices A B and C though you can make a fourth choice and decline to choose any.  Hmrc will be advised you have started and will in due course advise your employer of the P45 details, you tax will then be corrected in the next payday after the details are received.

himalshelat

chrisbur said:

Hmrc will be advised you have started and will in due course advise your employer of the P45 details, you tax will then be corrected in the next payday after the details are received.

Does that mean that I will get back what I received less this month? Or does it mean they will not tax me at a higher rate anymore? or both?

chrisbur

himalshelat said:

chrisbur said:

Hmrc will be advised you have started and will in due course advise your employer of the P45 details, you tax will then be corrected in the next payday after the details are received.

Does that mean that I will get back what I received less this month? Or does it mean they will not tax me at a higher rate anymore? or both?

It means that your tax you are due to pay at the time your salary is done will be corrected .  If as is very likely this results in your tax due being reduced then the tax you pay will be reduced possibly by enough to give you a rebate.  A better indication can be given if you give details of your P45 part 1A gross tax week/month number tax code if an X after.  Both sets of figures if two. Then from last payslip taxable gross tax paid month number.

Savvy_Sue

If you haven't given your new employer a P45, did you complete a New Starter Declaration? That would have asked whether this is your main or only job, and if you'd said 'yes' you'd lose the M1 (eventually) from your tax code. 

himalshelat

This is sorted. I was able to get a reply from the Payroll.

Unfortunately your previous pay and tax from previous employment has just come through. Because of this your August payment was done using Emergency Tax. Emergency Tax isn’t as bad as it sounds, in fact in a lot of cases it under taxes people. However as you started 1st July, you have only received one month tax allowance instead of 2 months.
The good news is that you’re tax code is now cumulative. I have calculated your September and October payslips (attached). In September the tax figure is  -145.80 as it is adjusting your tax paid for 6 months based on your taxable pay for 6 months.