Can I reclaim tax and NI

Scot_39

Dazed_and_C0nfused said:

Scot_39 said:

quicksilverfox said:

I recently started my first job in November 2023, prior to that I was unemployed for around 1.5 years after graduating in 2022 and received universal credit during that time.

According to my P60 I received this week
my tax code is 1257L M1
Pay £9647.09 Tax £880.40
NIC £462.91

Am I right in believing since it is below the £12570 allowance I shouldn't have paid any tax, I'm not sure how NI is calculated and would appreciate any advice regarding any overpayment there too.

How do I go about reclaiming either of the two.

NI unlike tax is never cumulative - it is judged against the threshold(s) for the given week or month - which are arguably strictly how the thresholds are defined - weekly etc not annually - so there is no real concept of over and under paying.  Nothing to reclaim.

You were placed on one of the so called emergency tax codes. 

This forces tax to work in a kind of per period // similar way at the time as far as payroll run processing - but your actual allowance is and remains an annual one - and so any errors at year end - Like your £880 can be claimed back 

See
https://www.gov.uk/tax-codes/emergency-tax-codes


The 1257L M1 although the numeric figure agrees with the standard allowance - that M1 basis forces employers (and private / employer pension companies) to behave very differently from a standard 1257L cumulative tax code.

The M1 stands for month 1 - means your monthly pay was assessed repeatedly as a first month on zero history (prior pay and tax) basis - even annoyingly if the previous months only paid by same employer that tax year.  So each month pay simply judged  against just 1/12th of £12570 personal allowance.

So over the 5 months you have averaged c£1930 - and paid tax on the excess over £12570/12 = £1047.5  so 20% on circa £880 per month = £176 pm = £880 over the 5 months. 

Despite earning under the £12570 PA over the 5 of 12 months worked..

If you had been issued a cumulative tax code 1257L anytime between first and last - i.e. prior to Mar payroll, the excess could have been refunded automatically via payroll.

Essentially your total income to date is assessed against accumulated allowances - so by Mar total income vs total allowance.

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye11090

You should however be placed on the cumulative code from April.

(The submission of an old P45 from a previous employer or even the right answer on a new starter questionaire from past agency payroll - will trigger HMRC to introduce a more normal cumulative basis tax code - but many do get stuck for a few months on emergency codes.)

You are now - unless asked to register and submit a full self assesment SA return - I suspect probably will be - in the more modern path - and have to wait for your P800 personal calculation (*) (or simple assesment notice) - for a refund - which should say you are owed the £880. 

See
https://www.gov.uk/tax-overpayments-and-underpayments

If you don't hear from HMRC by autumn I'd give them a ring.

You might want to ring just to make sure they have your contact details - and keep them upto date - you dont want to miss a letter telling you to reclaim that £880.

And/or it might be wise / helpful for future to register for online access to your personal tax account to monitor things like tax codes and p800 processing.

I used to get paper copies of all tax code changes - I used to get several per year - but mine changed recently - between jobs - with HMRC having duplicated (doubled) not deleted an employment allowance for an old job - and wasn't aware.  And current payroll are now on 4th code since Jan - 1st was default 1257L M1.

Hmrc should give you the option of immediately reclaiming the cash - once that calc process completed - at least I was able to request via on line account forms -  or give option to modify your future years tax code to repay it by year end.  I would always take the cash if owed. 

(Even used to pay when owed tax when filed SA.)

In summary

NI is as was paid.

Income Tax should sort itself out automatically by autumn.

Someone in payroll at firm might be able to explain process better face to face.

A good explanation, with one exception.

HMRC never refund a tax overpayment like this by an adjustment to the tax code of a later tax year.

Once the P800 calculation is issued the op will be able to transfer the refund into their bank account (via their Personal Tax Account).

And there is only one emergency tax code, 1257L.

Sorry - yes thanks - always refund - by cheque if not by online electronic transfer.  Will modify.


Only used p800 once that sort of worked (months of delay vs filing sa in early mid Apr for quick rebate is not good).  The year before iirc the p800 missed some taxable interest etc so needed correction  - more tricky than just a simple SA to my mind.

My perhaps naive understanding in past was 1257L is only the tax code if that was the full tax code without the emergency qualifier.

In past 2 months literally I have had 3 month 1 tax codes - the default 1257L M1 emergency for first payment.

An erroneous 1st personal update 1xxxL M1 basis containing a duplicated not deleted old employment allowance. When called hmrc re error they said initially were going to reissue 1257L M1 until end of year  - but supervisor agreed to issue  a cumulative basis 1257L for Mar to save me filing SA again this year to reclaim the Jan Feb tax overpayment.

Re only one 1257L  ?

HMRC link above lists 3 
1257L W1
1257L M1 (or as new payroll put 1257L/M1)
1257L X 

Which clearly highlight different meaning in past from standard 1257L.

For those like me used to it.

I've seen something re new guidance for employers referring to only 1257L on google from Apr24.

Is it changing ?

Dazed_and_C0nfused

Scot_39 said:

Dazed_and_C0nfused said:

Scot_39 said:

quicksilverfox said:

I recently started my first job in November 2023, prior to that I was unemployed for around 1.5 years after graduating in 2022 and received universal credit during that time.

According to my P60 I received this week
my tax code is 1257L M1
Pay £9647.09 Tax £880.40
NIC £462.91

Am I right in believing since it is below the £12570 allowance I shouldn't have paid any tax, I'm not sure how NI is calculated and would appreciate any advice regarding any overpayment there too.

How do I go about reclaiming either of the two.

NI unlike tax is never cumulative - it is judged against the threshold(s) for the given week or month - which are arguably strictly how the thresholds are defined - weekly etc not annually - so there is no real concept of over and under paying.  Nothing to reclaim.

You were placed on one of the so called emergency tax codes. 

This forces tax to work in a kind of per period // similar way at the time as far as payroll run processing - but your actual allowance is and remains an annual one - and so any errors at year end - Like your £880 can be claimed back 

See
https://www.gov.uk/tax-codes/emergency-tax-codes


The 1257L M1 although the numeric figure agrees with the standard allowance - that M1 basis forces employers (and private / employer pension companies) to behave very differently from a standard 1257L cumulative tax code.

The M1 stands for month 1 - means your monthly pay was assessed repeatedly as a first month on zero history (prior pay and tax) basis - even annoyingly if the previous months only paid by same employer that tax year.  So each month pay simply judged  against just 1/12th of £12570 personal allowance.

So over the 5 months you have averaged c£1930 - and paid tax on the excess over £12570/12 = £1047.5  so 20% on circa £880 per month = £176 pm = £880 over the 5 months. 

Despite earning under the £12570 PA over the 5 of 12 months worked..

If you had been issued a cumulative tax code 1257L anytime between first and last - i.e. prior to Mar payroll, the excess could have been refunded automatically via payroll.

Essentially your total income to date is assessed against accumulated allowances - so by Mar total income vs total allowance.

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye11090

You should however be placed on the cumulative code from April.

(The submission of an old P45 from a previous employer or even the right answer on a new starter questionaire from past agency payroll - will trigger HMRC to introduce a more normal cumulative basis tax code - but many do get stuck for a few months on emergency codes.)

You are now - unless asked to register and submit a full self assesment SA return - I suspect probably will be - in the more modern path - and have to wait for your P800 personal calculation (*) (or simple assesment notice) - for a refund - which should say you are owed the £880. 

See
https://www.gov.uk/tax-overpayments-and-underpayments

If you don't hear from HMRC by autumn I'd give them a ring.

You might want to ring just to make sure they have your contact details - and keep them upto date - you dont want to miss a letter telling you to reclaim that £880.

And/or it might be wise / helpful for future to register for online access to your personal tax account to monitor things like tax codes and p800 processing.

I used to get paper copies of all tax code changes - I used to get several per year - but mine changed recently - between jobs - with HMRC having duplicated (doubled) not deleted an employment allowance for an old job - and wasn't aware.  And current payroll are now on 4th code since Jan - 1st was default 1257L M1.

Hmrc should give you the option of immediately reclaiming the cash - once that calc process completed - at least I was able to request via on line account forms -  or give option to modify your future years tax code to repay it by year end.  I would always take the cash if owed. 

(Even used to pay when owed tax when filed SA.)

In summary

NI is as was paid.

Income Tax should sort itself out automatically by autumn.

Someone in payroll at firm might be able to explain process better face to face.

A good explanation, with one exception.

HMRC never refund a tax overpayment like this by an adjustment to the tax code of a later tax year.

Once the P800 calculation is issued the op will be able to transfer the refund into their bank account (via their Personal Tax Account).

And there is only one emergency tax code, 1257L.

Sorry - yes thanks - always refund - by cheque if not by online electronic transfer.  Will modify.


Only used p800 once that sort of worked (months of delay vs filing sa in early mid Apr for quick rebate is not good).  The year before iirc the p800 missed some taxable interest etc so needed correction  - more tricky than just a simple SA to my mind.

My perhaps naive understanding in past was 1257L is only the tax code if that was the full tax code without the emergency qualifier.

In past 2 months literally I have had 3 month 1 tax codes - the default 1257L M1 emergency for first payment.

An erroneous 1st personal update 1xxxL M1 basis containing a duplicated not deleted old employment allowance. When called hmrc re error they said initially were going to reissue 1257L M1 until end of year  - but supervisor agreed to issue  a cumulative basis 1257L for Mar to save me filing SA again this year to reclaim the Jan Feb tax overpayment.

Re only one 1257L  ?

HMRC link above lists 3 
1257L W1
1257L M1 (or as new payroll put 1257L/M1)
1257L X 

Which clearly highlight different meaning in past from standard 1257L.

For those like me used to it.

I've seen something re new guidance for employers referring to only 1257L on google from Apr24.

Is it changing ?

They are all the same tax code (1257L).  And that is the emergency tax code.

The bit after the tax code relates to the basis the code is operated by an employer or pension payer.

There are a few ways payroll software shows this, X being a very common one to indicate a non cumulative basis.

Where an employer or pension payer is operating a tax code (not just 1257L) on a non cumulative basis at the end of the tax year one of two things happens.

Either HMRC issue a new code for the new tax year or where that doesn't happen the employer follows the guidance on the P9X.

https://www.gov.uk/government/publications/p9x-tax-codes

Because of the freezing of the Personal Allowance this will often be to simply change 1257L non cumulative to 1257L on a cumulative basis from 6 April.

quicksilverfox

Thank you all for your helpful answers.