Variable income and tax

scarlet3063

I get paid monthly and my income is variable due to the nature of the job. Some months it is higher than others and i get taxed. Some months it is considerably lower than my tax threshold. Will I get a tax rebate and the end of the tax year for the months I have paid tax as my overall income will fall below the yearly allowance?

Dazed_and_C0nfused

scarlet3063 said:

I get paid monthly and my income is variable due to the nature of the job. Some months it is higher than others and i get taxed. Some months it is considerably lower than my tax threshold. Will I get a tax rebate and the end of the tax year for the months I have paid tax as my overall income will fall below the yearly allowance?

No.

If you are on a cumulative tax code then your tax should be correct each pay day, so you get refunds as part of your monthly pay.

For example say your tax code allowances were £1,000/month, you aren't Scottish resident for tax purposes and in month 1 of the tax year you earn £1,200 (in taxable pay).  You would pay £40 in tax.

Then in month two you earn £950.  So total earnings are £2,150 and tax code allowances are £2,000.  You would be due to pay £30 in tax so would get £10 of the £40 already paid back.

Then month 3 you earn £1,200 again.  Total earnings are now £3,350 and tax code allowAnces £3,000 so you need to pay £70 in tax in total.  You have already paid £30 at month 2 so pay £40 in month 3.  Total tax now £70.

Then in month 4 you have a quiet month and only earn £550.  Total earnings are now £3,900 and tax code allowances are £4,000.  So no tax is due.  And you get all the £70 paid already paid refunded in your wages.

These refunds are nothing to do with HMRC, they are done automatically by your employers payroll system.

Bookworm105

if only schools prepared people for the world of work....

GrumpyDil

Bookworm105 said:

if only schools prepared people for the world of work....

Probably a little harsh given I know people who left school 40 years ago who still have no clue about how income tax generally works (ignoring complications about having more than one income stream etc) 

scarlet3063

Dazed_and_C0nfused said:

scarlet3063 said:

I get paid monthly and my income is variable due to the nature of the job. Some months it is higher than others and i get taxed. Some months it is considerably lower than my tax threshold. Will I get a tax rebate and the end of the tax year for the months I have paid tax as my overall income will fall below the yearly allowance?

No.

If you are on a cumulative tax code then your tax should be correct each pay day, so you get refunds as part of your monthly pay.

For example say your tax code allowances were £1,000/month, you aren't Scottish resident for tax purposes and in month 1 of the tax year you earn £1,200 (in taxable pay).  You would pay £40 in tax.

Then in month two you earn £950.  So total earnings are £2,150 and tax code allowances are £2,000.  You would be due to pay £30 in tax so would get £10 of the £40 already paid back.

Then month 3 you earn £1,200 again.  Total earnings are now £3,350 and tax code allowAnces £3,000 so you need to pay £70 in tax in total.  You have already paid £30 at month 2 so pay £40 in month 3.  Total tax now £70.

Then in month 4 you have a quiet month and only earn £550.  Total earnings are now £3,900 and tax code allowances are £4,000.  So no tax is due.  And you get all the £70 paid already paid refunded in your wages.

These refunds are nothing to do with HMRC, they are done automatically by your employers payroll system.

Thank you for explaining 😊

scarlet3063

Bookworm105 said:

if only schools prepared people for the world of work....

Wouldn't that be a good idea! It must be nice to be a know it all.

chrisbur

From the details in your post you appear to be on a non-cumulative tax code, sometimes called month 1 basis.  Do you know why you are on this tax code, have you recently started employment at this job, what is your tax code?
If you could move to a cumulative code your tax would then be corrected in the next wage you received.