Please help me understand why my tax has increased?

annetheman

Hi

Income tax is something I've never quite understood very well (or paid much attention to!) as I am trying to become debt-free (paying off a large amount of unsecured debt using snowball method), I am trying to make every income penny count!

Here is my payslip for October 2022, where income tax deduction is shown £826.40.

Then I have received this payslip for November 2022, where income tax deduction has increased to £1048.07.

My tax code has not changed and I am on the same salary - did I underpay in October? Any help understanding this is welcome!

My code is 1242L, salary is £65,000, pension salary sacrifice is 3%, student loan is pre-2012 plan 1.

Thanks for any advice!

sheramber

What does your September payslip say?

annetheman

sheramber said:

What does your September payslip say?

September 2022 income tax deduction was £1842.86 and my code was 1257L M1. I assumed this was because I started the job partway through August (20th Aug), and had a previous PAYE job until 12th August on the 1257L tax code.

At my last job change (Jan 2022) I found out that "activating your tax-free allowance twice in the same month means you underpaid so your tax-free allowance will change" for a while - again, don't really understand it very well so any info on that would also be great!

molerat

November looks around what I would expect and should be your normal monthly so I suspect that October is correcting an overpayment of tax in previous months.  The only way to check is to add up all the taxable pay for each month from April to November and all the tax paid as that is how PAYE works.

Jeremy535897

At my last job change (Jan 2022) I found out that "activating your tax-free allowance twice in the same month means you underpaid so your tax-free allowance will change" for a while - again, don't really understand it very well so any info on that would also be great!

One twelfth of your personal allowance is allocated to each month you are paid. If two different employers each paid you in one month using code 1257L, you got two twelfths of allowance in that month rather than one. Your code is then altered to take back this windfall of one twelfth of your personal allowance over the remaining part of the tax year.

chrisbur

Without seeing your taxable gross to date and tax paid to date figures cannot be certain but this looks like your earnings prior to this job were somewhat lower than your new earnings.  November earnings appear to have taken you into the 40% tax band.
If this is correct then the tax you pay will continue along the lines of that paid in November.
EDIT  Looking at old posts I see that it is correct that your earnings before this job were somewhat lower so I am fairly confident that you crossed into the 40% tax band with your earnings for October but as you were on emergency tax for September you paid some 40% tax that month when had you been on your correct tax code you would not have done so, this meant that your October tax was reduced by the 40% paid in September.  November onwards will be your new tax rate. END EDIT

If you could give the year to date figures I mentioned this can be checked.

annetheman

chrisbur said:

Without seeing your taxable gross to date and tax paid to date figures cannot be certain but this looks like your earnings prior to this job were somewhat lower than your new earnings.  November earnings appear to have taken you into the 40% tax band.
If this is correct then the tax you pay will continue along the lines of that paid in November.
EDIT  Looking at old posts I see that it is correct that your earnings before this job were somewhat lower so I am fairly confident that you crossed into the 40% tax band with your earnings for October but as you were on emergency tax for September you paid some 40% tax that month when had you been on your correct tax code you would not have done so, this meant that your October tax was reduced by the 40% paid in September.  November onwards will be your new tax rate. END EDIT

If you could give the year to date figures I mentioned this can be checked.

Thank you, that makes sense. 

Jeremy535897 said:

At my last job change (Jan 2022) I found out that "activating your tax-free allowance twice in the same month means you underpaid so your tax-free allowance will change" for a while - again, don't really understand it very well so any info on that would also be great!

One twelfth of your personal allowance is allocated to each month you are paid. If two different employers each paid you in one month using code 1257L, you got two twelfths of allowance in that month rather than one. Your code is then altered to take back this windfall of one twelfth of your personal allowance over the remaining part of the tax year.

Ahhhh this is the clearest explanation I've heard - it suddenly clicked! Thanks a lot!