Should my employed pay have been taxed?

GeekieGirlie

I have worked part time for the tax year so far and now have gone full time (with same employer)
For the Tax year to date I've roughly earned 5550 
My pay for Jan is 1500. so presume it will be same for Feb and march. 
So makes my tax year earnings 10,050 so won't pay tax for this tax year.
I have had NI and pension taken out...
But, I thought if over the monthly threshold of 1048 they'd automatically start deducting tax now too and then end of tax year I'd get a refund back. So I thought that 1500 I'd have had some taken.

So its great that they haven't deducted it and I don't have to get a refund, but my question is shouldn't I have got taxed though? Or do they look at what is left for the rest of the tax year and know I won't earn enough to be taxed? 
For the new tax year I will definitely be over threshold so will it correct itself or how does it...Does my employer payroll tell them?
Sorry if this is confusing and many questions lol I just don't know if I should be doing anything to correct it or wait until April until I should be paying tax and see if its right?

comeandgo

Your tax code will be cumulative so you will pay no tax this year.  Your first pay in April, new tax year, should have some tax depending on your tax code. You need do nothing.

comeandgo

Your tax code will be cumulative so you will pay no tax this year.  Your first pay in April, new tax year, should have some tax depending on your tax code. You need do nothing.

FatherTireseus

Income tax is calculated on a cumulative basis.  Each payday, your employer has to work out how much personal allowance you have accrued up to that point in the tax year, and compare that to your total income in the tax year to date.  The excess of income over personal allowance is taxed.  To work out the tax in the current period, whatever the total tax paid up to the last payday gets deducted.

So in April, at the start of the tax year, your personal allowance is £1,047.50 which is compared to your income.  If your income is less, you don’t pay tax that month.

By January, this is month 10 of the tax year, so you will have accrued 10 months worth of personal allowance, i.e. £10,475.  If your total income in the tax year to January is less than that, you won’t pay any tax.

As an extreme example, if someone didn’t earn anything from April through to December, but earned £10,000 in January month only, they wouldn’t pay tax on that income as their cumulative income in the tax year is still less (just) than the personal allowance to that point. 

If you had earned the £1,500 in April, then you would have paid tax as this would have been over the personal allowance for the first month. 

National Insurance on the other hand, is based on pay in the period (each week, or month, depending on how often you are paid) and not the cumulative period.

So I don’t think you need to worry, it sounds like you haven’t paid tax but given your income you haven’t yet reached the threshold where you need to pay tax.  And probably won’t in the the full tax year.

Everything is calculated on actual income already earned, they don’t anticipate future income as in any month someone might earn more or less than expected.

The employer works off tax rates and data on personal allowances supplied by HMRC.  From April 6 this year the new tax year starts, HMRC tells your employer what tax code to use for you (probably 1257L unless you have any adjustments that need to be made to your code) and the tax gets calculated and deducted from your pay.  So if you are still earning £1,500 a month by April, you will pay tax on that.

But if your income dropped back down in future months then you might be due a refund as your personal allowance might be more than your pay later in the year.  It’s all calculated by a set procedure and would happen automatically.  You shouldn’t need to do anything, everything should be calculated correctly.

GeekieGirlie

comeandgo said:

Your tax code will be cumulative so you will pay no tax this year.  Your first pay in April, new tax year, should have some tax depending on your tax code. You need do nothing.

That's great thank you.  

GeekieGirlie

FatherTireseus said:

Income tax is calculated on a cumulative basis.  Each payday, your employer has to work out how much personal allowance you have accrued up to that point in the tax year, and compare that to your total income in the tax year to date.  The excess of income over personal allowance is taxed.  To work out the tax in the current period, whatever the total tax paid up to the last payday gets deducted.

So in April, at the start of the tax year, your personal allowance is £1,047.50 which is compared to your income.  If your income is less, you don’t pay tax that month.

By January, this is month 10 of the tax year, so you will have accrued 10 months worth of personal allowance, i.e. £10,475.  If your total income in the tax year to January is less than that, you won’t pay any tax.

As an extreme example, if someone didn’t earn anything from April through to December, but earned £10,000 in January month only, they wouldn’t pay tax on that income as their cumulative income in the tax year is still less (just) than the personal allowance to that point. 

If you had earned the £1,500 in April, then you would have paid tax as this would have been over the personal allowance for the first month. 

National Insurance on the other hand, is based on pay in the period (each week, or month, depending on how often you are paid) and not the cumulative period.

So I don’t think you need to worry, it sounds like you haven’t paid tax but given your income you haven’t yet reached the threshold where you need to pay tax.  And probably won’t in the the full tax year.

Everything is calculated on actual income already earned, they don’t anticipate future income as in any month someone might earn more or less than expected.

The employer works off tax rates and data on personal allowances supplied by HMRC.  From April 6 this year the new tax year starts, HMRC tells your employer what tax code to use for you (probably 1257L unless you have any adjustments that need to be made to your code) and the tax gets calculated and deducted from your pay.  So if you are still earning £1,500 a month by April, you will pay tax on that.

But if your income dropped back down in future months then you might be due a refund as your personal allowance might be more than your pay later in the year.  It’s all calculated by a set procedure and would happen automatically.  You shouldn’t need to do anything, everything should be calculated correctly.

Wow.. thank you for that and taking the time to reply all that info! That makes sense now. Brilliant thank you so much.

Savvy_Sue

Assuming that your tax code is 1257L and that it doesn't have W1M1 attached to it, then it's perfectly fine. That's what comeandgo means by cumulative: HMRC adds what you've been paid this month to what you've been paid so far, forecasts what you'll be paid in the tax year if you continue to be paid what you've been paid this month, and checks whether tax is due this month. 

If your code is BR or DOES have the W1M1 attached to it, then yes, you should have been paying some tax. But very few employers calculate these things manually: there is likely to be a payroll process doing all the sums for them. 

Don't forget to set your budget on the assumption that you will pay tax from April onwards, and there's also a rise in National Insurance then. And if you haven't been earning enough to be enrolled in a pension plan, that will happen too. 

GeekieGirlie

Savvy_Sue said:

Assuming that your tax code is 1257L and that it doesn't have W1M1 attached to it, then it's perfectly fine. That's what comeandgo means by cumulative: HMRC adds what you've been paid this month to what you've been paid so far, forecasts what you'll be paid in the tax year if you continue to be paid what you've been paid this month, and checks whether tax is due this month. 

If your code is BR or DOES have the W1M1 attached to it, then yes, you should have been paying some tax. But very few employers calculate these things manually: there is likely to be a payroll process doing all the sums for them. 

Don't forget to set your budget on the assumption that you will pay tax from April onwards, and there's also a rise in National Insurance then. And if you haven't been earning enough to be enrolled in a pension plan, that will happen too. 

Great thank you! Much clearer now I know how it works.

FatherTireseus

GeekieGirlie said:

Wow.. thank you for that and taking the time to reply all that info! That makes sense now. Brilliant thank you so much.

You’re welcome :-).

Tax can get….complicated. As Savvy_Sue mentions, your tax code can get adjusted so that tax is calculated based simply on what happens in the month, without taxing income or tax in previous periods into account.  If that happened your tax code would end in W1 or M1, or X. A common reason for using those is if you change jobs and your new employer doesn’t yet have details of income and tax paid in your previous job yet.  But if your tax code is just something like 1257L it should all be fairly straightforward.

GeekieGirlie

FatherTireseus said:

GeekieGirlie said:

Wow.. thank you for that and taking the time to reply all that info! That makes sense now. Brilliant thank you so much.

You’re welcome :-).

Tax can get….complicated. As Savvy_Sue mentions, your tax code can get adjusted so that tax is calculated based simply on what happens in the month, without taxing income or tax in previous periods into account.  If that happened your tax code would end in W1 or M1, or X. A common reason for using those is if you change jobs and your new employer doesn’t yet have details of income and tax paid in your previous job yet.  But if your tax code is just something like 1257L it should all be fairly straightforward.

Thanks yes my code is 1257L so should be ok. Thank you again!

MalMonroe

Hi, income tax can be a real pain and sometimes HMRC do get it wrong, so you are right to keep an eye on it and question things. Also don't forget that you can log in to your own tax account on the government website. They keep all your personal tax info in that account. You just have to register once and then, bob's your uncle you can use it whenever you like.

I find it very helpful and informative. And if you have any queries you can also ask while you are logged in to your account. Very handy and also, quick. 

Link here - https://www.gov.uk/log-in-register-hmrc-online-services