Can I pay my tax yearly rather than cumulatively?

aroques

I would like to change the way that I am taxed, so that it is based on only my total earnings in that tax year, rather than on a monthly/weekly basis. 

Essentially I work on a bank/zero hours contract, such that my total earnings are between £12000-£15000 in a tax year. Because I pick up shifts as and when, my earnings are very irregular and I can't predict what my total earnings will be (or whether they will fall above or below my £12750 allowance). Some months I do almost no work, whilst in others (mostly over the summer months as I am primarily a university student) I work near to full-time hours. 

My tax code is 1250L Cumulative, which means that in the summer if I work and earn, say, £2000 in a month I am taxed 20% on £938 of that (despite only earning £2000 in total in the tax year so far). I then get that paid the tax back later in the year when I do a month where I earn less than £1063. This makes it really hard to budget, as if I work more shifts so I can afford an upcoming large payment, I get taxed massively on that and only see half the money later (sometimes after I'd like to have spent it!) despite still being well under the threshold in total.

What I would like to do, is pay no tax until my earnings hit £12750 in total in the current tax year, and then whatever I earn above that I pay 20% on all of those earnings, whenever that would be. So, if I earned £2000 every month, I would pay no tax for the first 6 months, in the 7th month I'd pay tax on £1250 of earnings and then in months 8-12 I'd pay tax on £2000 (so £400 per month). This would mean that I only pay what I owe when I owe it, and if I don't earn over the threshold I wouldn't pay any at all.

Is it possible to set my tax up in this way? I have spoken to HMRC but the adviser wasn't really sure and I can't find anything online.

[Deleted User]

No - it is not possible. Unfortunately that is how PAYE works.

p00hsticks

aroques said:

Is it possible to set my tax up in this way? I have spoken to HMRC but the adviser wasn't really sure and I can't find anything online.

Not as an employee - as the name suggests, that;s the way that the Pay As You Earn system works.

molerat

My tax code is 1250L Cumulative, which means that in the summer if I work and earn, say, £2000 in a month I am taxed 20% on £938 of that (despite only earning £2000 in total in the tax year so far)

If you had only earned a total of £2000 year to date in "summer" so probably June, M3, you would not pay any tax on a 1250L tax code as you would have built up £3127 tax free allowance by that point.

aroques

molerat said:

My tax code is 1250L Cumulative, which means that in the summer if I work and earn, say, £2000 in a month I am taxed 20% on £938 of that (despite only earning £2000 in total in the tax year so far)

If you had only earned a total of £2000 year to date in "summer" so probably June, M3, you would not pay any tax on a 1250L tax code as you would have built up £3127 tax free allowance by that point.

Indeed, those figures were an example.

In reality I earned close to the threshold in April and May, and then due to some back-pay got around £4000 in June, which for some reason I still can't quite work out they taxed at 20% for the whole lot. I now have that tax back but I think it would be easier if I just paid when I hit the threshold personally but there we go! 

aroques

p00hsticks said:

Not as an employee - as the name suggests, that;s the way that the Pay As You Earn system works

purdyoaten2 said:

No - it is not possible. Unfortunately that is how PAYE works.

Thanks both. I do want to pay as I earn (rather than get a tax bill in the post after the end of the year), just pay as I earn what I need to pay tax on, rather than paying preemptively. 

But alas I will let the needless cycle of taxation and reimbursement continue! 

Dazed_and_C0nfused

aroques said:

I would like to change the way that I am taxed, so that it is based on only my total earnings in that tax year, rather than on a monthly/weekly basis. 

Essentially I work on a bank/zero hours contract, such that my total earnings are between £12000-£15000 in a tax year. Because I pick up shifts as and when, my earnings are very irregular and I can't predict what my total earnings will be (or whether they will fall above or below my £12750 allowance). Some months I do almost no work, whilst in others (mostly over the summer months as I am primarily a university student) I work near to full-time hours. 

My tax code is 1250L Cumulative, which means that in the summer if I work and earn, say, £2000 in a month I am taxed 20% on £938 of that (despite only earning £2000 in total in the tax year so far). I then get that paid the tax back later in the year when I do a month where I earn less than £1063. This makes it really hard to budget, as if I work more shifts so I can afford an upcoming large payment, I get taxed massively on that and only see half the money later (sometimes after I'd like to have spent it!) despite still being well under the threshold in total.

What I would like to do, is pay no tax until my earnings hit £12750 in total in the current tax year, and then whatever I earn above that I pay 20% on all of those earnings, whenever that would be. So, if I earned £2000 every month, I would pay no tax for the first 6 months, in the 7th month I'd pay tax on £1250 of earnings and then in months 8-12 I'd pay tax on £2000 (so £400 per month). This would mean that I only pay what I owe when I owe it, and if I don't earn over the threshold I wouldn't pay any at all.

Is it possible to set my tax up in this way? I have spoken to HMRC but the adviser wasn't really sure and I can't find anything online.

A sorry state of affairs 😳