Confused about income tax for a first job

martin2345uk

Writing this on behalf of my friend who’s recently started his first job at Tesco...
We’re a bit confused about the income tax... the tax code on his payslips (he’s had 2 so far) is 1260L, and so far he’s paid no tax at all. 

He is basically full time so his equivalent salary is around £19k, which is obviously above the £12,600 allowance, but does it wait until he’s earned his portion of the tax free amount for the time he’s working in this tax year, and then he will start paying tax after that
point..?
And does the fact he got two Universal Credit payments before he started have anything to do with it?

Thanks for any pointers!

Dazed_and_C0nfused

If this really is his first ever job then he will have been able to earn £8,406 (to 5 December) before any tax would be deducted.

By 5 January 2021 this will be £9,456.

And so on to 5 April 2021.

From 6 April 2021 they will pay tax if the first month's pay exceeds £1051.

Thrugelmir

martin2345uk said:

but does it wait until he’s earned his portion of the tax free amount for the time he’s working in this tax year, and then he will start paying tax after that
point..?

Correct, tax works on a cumulative basis. Divide the annual personal allowance by 12 and multiply by the number of months in the tax year to date ( April is tax month 1).  This is the amount year to date that he can earn tax free. Starting so late in the year he won't pay any tax this tax year. Will do from next April. . 

General_Grant

Universal Credit payments are not taxable income.

(see Income Tax: Tax-free and taxable state benefits - GOV.UK (www.gov.uk) for list of taxable and non-taxable benefits)

martin2345uk

Thank you everyone for all your help that explains it really well!

FaceHead

Your friend should brace themselves for an April 'pay cut' when they start paying tax, and not get too used to how much they're taking home currently. 

getmore4less

Best to live on the regular annual net per month(based on an annual budget) 

put any excess to one side for one off non recurring payments or savings for longer term stuff.