PILON and new job | Tax position.

TommyAV

Hi all,
Hoping someone with knowledge of the PAYE/Tax system can advise here.

Timeline:
18th Jan - Confirmation of redundancy and last working day. PILON payment to follow.
21st Jan - Started new job with different company.
26th Jan - Previous full months pay from old job due. (Is paid 4 weekly, 2 weeks behind).
23rd Feb - Final week’s pay from old job, outstanding holiday etc, PILON and Redundancy due. P45 issued at this point.
23rd Feb - 1st Salary payment from NEW job also due.

I’ve filled in New Starter Form for new job, in absence of P45, as technically I am no longer employed by old company . . . even though I’ve still got two more pay cycles to come.

Expecting to be rinsed in tax, as I would assume the system would effectively think I have two jobs; however my question is, what calculation can I use to have an idea of what I expect come 23rd Feb.

Hope that makes sense. Thanks in advance.

chrisbur

What option did you select on the new starter form?

TommyAV

@chrisbur that I have had previous employment this tax year. 

chrisbur

You should be taxed on the emergency tax code of 1257L applied on a non-cumulative basis.  That means you will get an allowance of approx. 1048 if monthly paid then taxed 20% then higher rate if earnings high enough.
Your old employer will almost certainly still be using your normal tax code on a cumulative basis so will also be giving you a tax free allowance and 20% tax band allowance ( then 40% etc if earnings high enough to go into higher rate tax).
Result is you will not have paid enough tax.  This under payment will be adjusted when your new employer adds the P45 figures to your pay record.  I have known it happen that HMRC pick this up and issue a code which will spread the under payment over the remainder of the tax year so that it is not all taken at once but I do not know if this always happens. 

penners324

You're likely to underpay tax in February. Then catch up in March

Dazed_and_C0nfused

penners324 said:

You're likely to underpay tax in February. Then catch up in March

Although as it's very late in the tax year it's possible that the estimated tax owed would be included in the following year's tax code rather than the current year's code?

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye11060

TommyAV

Thanks all.
I was expecting it to be deducting massively, with effectively two pay packets due, turns out it’s not so bad. 😊