Payroll Tax query

TheMilkmansDad

HI,

There's probably something really simple I'm missing here but i can't get my head around it! Got my 1st payslip of the year today and I'm paying an additional £47 in tax.

Now I'm no payroll expert, but the only thing that has changed is the Tax code - going from 1037L to 1044L. My understanding from that is that I should be paying less tax than before - is that correct? In which case why am I paying more?

Any pointers appreciated before I start shouting at my HR department only to get shot down! I'd much rather be shot down by people that I don't know 

chrisbur

In order to tell you what is going on you need to give some figures 
From the payslip you paid the extra £47 on and the payslip before that ....
Taxable gross
Tax paid
Taxable gross to date
Tax paid to date

Hopefully for the last payslip the to date figures should be the same as the monthly/Weekly figures.

Remember that it is always possible that what you see as "an additional £47 in tax" might actually be the correct tax and the older payslip may have a tax figure that is lower by £47 than normal for some reason.

Marcon

Has anything else changed - your earnings, pension contribution...?

TheMilkmansDad

As far as I can tell nothing has changed

Paid monthly so last payslip was P12 (last of the year) tax code 1037L
Top Line £3,750
Tax £529.00
Taxable pay to date £51,800 (this would take me to the higher rate tax level I think but would be a one-off for last year due to a bonus for 10 years service with the firm - would this impact this years tax?)
Tax to date £9,068

Todays payslip is period 1 (first of the year) tax code 1044L
Top line £3,750
Tax £575.80

I contribute 6% Net to pension after tax so this shouldn't make any difference to the amount I'm taxed, it's not a salary sacrifice.

I'm hoping last years tax was correct - can't see any reason why it shouldn't have been?

chrisbur

TheMilkmansDad said:

As far as I can tell nothing has changed

Paid monthly so last payslip was P12 (last of the year) tax code 1037L
Top Line £3,750
Tax £529.00
Taxable pay to date £51,800 (this would take me to the higher rate tax level I think but would be a one-off for last year due to a bonus for 10 years service with the firm - would this impact this years tax?)
Tax to date £9,068

Todays payslip is period 1 (first of the year) tax code 1044L
Top line £3,750
Tax £575.80

I contribute 6% Net to pension after tax so this shouldn't make any difference to the amount I'm taxed, it's not a salary sacrifice.

I'm hoping last years tax was correct - can't see any reason why it shouldn't have been?

Working on slightly rounded figures if we take your earnings for month 12 
£3750 from which we deduct the monthly tax allowance of 1/12 of £10379 which is £865 just about
So £3750 less £865 gives £2885 which is taxable at 20% to give tax of £577
You actually paid £529 

So it is actually last years tax that is lower than normal not this years that is higher.

You ask "bonus for 10 years service with the firm - would this impact this years tax" 
No it did not impact on this year's tax but it did affect last year's tax.
The bonus put up your earnings and resulted in you paying quite a bit of tax at 40% your earnings after the bonus was paid were somewhat lower so each month some of that 40% tax was converted to 20% tax and this continued to the end of the tax year.  It was this that reduced your tax figure and made it appear that your tax this year had jumped up.
Your tax paid for the year was correct it is just that you were sort of overtaxed when you got the bonus so had to pay reduced tax for the rest of the year.

Just to confirm the calculation for this tax year..
£3750 less £870.75 (1/12 of £10449 is £2879.25 and 20% of £2879 is 

TheMilkmansDad

Thanks for this! now i read it it makes sense, need to quickly make some small alterations to my budget (i run i tight ship!).

Thanks again

deedee71

If you login or register for a Gateway HMRC account you can advise HMRC of your expected annual income.  They will likely have an estimate of £55k based on last financial year.  Might help.

TheMilkmansDad

Changed my estimated income a few weeks ago.

Now this may be a huge coincidence - but had an email notification last night to check my tax code change, logged in this morning and its now 1075L - there's a new item of "other expenses" of £312 which I assume is the WFH credit (6x52). No idea why it's only showing now as I did the online thing at the start of the tax year.

Hey-ho, we'll see hat next month payslip brings me!

deedee71

TheMilkmansDad said:

Changed my estimated income a few weeks ago.

Now this may be a huge coincidence - but had an email notification last night to check my tax code change, logged in this morning and its now 1075L - there's a new item of "other expenses" of £312 which I assume is the WFH credit (6x52). No idea why it's only showing now as I did the online thing at the start of the tax year.

Hey-ho, we'll see hat next month payslip brings me!

Just out of interest, do you know why your tax code isn't the "normal" one?

TheMilkmansDad

Hi Deedee, I have health  travel insurance through work which is a taxable benefit.

chrisbur

TheMilkmansDad said:

Changed my estimated income a few weeks ago.

Now this may be a huge coincidence - but had an email notification last night to check my tax code change, logged in this morning and its now 1075L - there's a new item of "other expenses" of £312 which I assume is the WFH credit (6x52). No idea why it's only showing now as I did the online thing at the start of the tax year.

Hey-ho, we'll see hat next month payslip brings me!

This should be worth a touch over £5 a month in reduced tax.  So £10 aprox next month as back-dated to start of tax year then the £5 or so from then on.