Income tax doubled mid-year

chrisbur

ender4 said:

DE_612183 said:

no, your payroll *should* automatically calculate the tax based on HMRC rules.

have you checked your personal tax account online which will show your estimated income for the year.

as an aside - how much is your gross?

With income tax at about 20% with a salary of £100,000 you should be paying about £2,285 tax per month.

Ahhh, i think it's making a bit more sense now. The online personal tax account did show something like £125k earlier in the tax year, but i did change it a few months ago to estimated £99,999.

£87k taxable income earned so far after salary sacrifice and paid £24k income tax so far.

I seem to have paid a massive chunk of tax in the early month when i received my bonus. HMRC must have thought i was going to earn that much every month.  Then they undercharged me for a few months as they realised that was a one-off, then mid-year they may have worked out my full year and started charging on that basis.  

If i ignore the month to month tax and just look at year to date figures, it seems it might just work out correctly by year-end.

I assume that you are rounding some of the figures as for month 10 on 1257L for exactly £87000 I make the tax to date figure £24323.46
Your assumption about high tax when the bonus was paid and then lower after that is correct but no-one (HMRC nor your employer ) was doing this, it is all in the maths used to calculate your tax.
Your tax allowances for each band are drip fed into the calculation each month 1/12 at a time so that first month you had a lot of higher rate tax deducted but next month when you got another 1/12 of each allowance some of that higher rate tax moved into lower rate tax bands so you got a sort of mini tax rebate which lowered the tax you would normally have paid.  It eventually returns to normal tax figure, so appears to go up.

It is a little disappointing that your payroll dept. could not tell you what was happening; but not surprising.  The computer does all the maths these days and the payroll staff do not know how the figures are calculated.  

eastcorkram

How on earth was the OP only paying £321 tax per month???

eskbanker

eastcorkram said:

How on earth was the OP only paying £321 tax per month???

Unwinding over-taxation in month 1....

Dazed_and_C0nfused

400ixl said:

Also remember that if trying to stay under £100k, you need to consider all taxable income which include things like the interest on savings over £500 at that level.

And the first £500 of interest as well 😉

It might be taxed at 0% but it is still part of the adjusted net income which determines the Personal Allowance.

penners324

ender4 said:

DE_612183 said:

no, your payroll *should* automatically calculate the tax based on HMRC rules.

have you checked your personal tax account online which will show your estimated income for the year.

as an aside - how much is your gross?

With income tax at about 20% with a salary of £100,000 you should be paying about £2,285 tax per month.

Ahhh, i think it's making a bit more sense now. The online personal tax account did show something like £125k earlier in the tax year, but i did change it a few months ago to estimated £99,999.

£87k taxable income earned so far after salary sacrifice and paid £24k income tax so far.

I seem to have paid a massive chunk of tax in the early month when i received my bonus. HMRC must have thought i was going to earn that much every month.  Then they undercharged me for a few months as they realised that was a one-off, then mid-year they may have worked out my full year and started charging on that basis.  

If i ignore the month to month tax and just look at year to date figures, it seems it might just work out correctly by year-end.

Your company's payroll works out the taxes that need paying, not HMRC

savergrant

penners324 said:

ender4 said:

DE_612183 said:

no, your payroll *should* automatically calculate the tax based on HMRC rules.

have you checked your personal tax account online which will show your estimated income for the year.

as an aside - how much is your gross?

With income tax at about 20% with a salary of £100,000 you should be paying about £2,285 tax per month.

Ahhh, i think it's making a bit more sense now. The online personal tax account did show something like £125k earlier in the tax year, but i did change it a few months ago to estimated £99,999.

£87k taxable income earned so far after salary sacrifice and paid £24k income tax so far.

I seem to have paid a massive chunk of tax in the early month when i received my bonus. HMRC must have thought i was going to earn that much every month.  Then they undercharged me for a few months as they realised that was a one-off, then mid-year they may have worked out my full year and started charging on that basis.  

If i ignore the month to month tax and just look at year to date figures, it seems it might just work out correctly by year-end.

Your company's payroll works out the taxes that need paying, not HMRC

And hopefully at the apposite point they send the money they've been deducting to HMRC...

Hoenir

chrisbur said:

ender4 said:

DE_612183 said:

no, your payroll *should* automatically calculate the tax based on HMRC rules.

have you checked your personal tax account online which will show your estimated income for the year.

as an aside - how much is your gross?

With income tax at about 20% with a salary of £100,000 you should be paying about £2,285 tax per month.

Ahhh, i think it's making a bit more sense now. The online personal tax account did show something like £125k earlier in the tax year, but i did change it a few months ago to estimated £99,999.

£87k taxable income earned so far after salary sacrifice and paid £24k income tax so far.

I seem to have paid a massive chunk of tax in the early month when i received my bonus. HMRC must have thought i was going to earn that much every month.  Then they undercharged me for a few months as they realised that was a one-off, then mid-year they may have worked out my full year and started charging on that basis.  

If i ignore the month to month tax and just look at year to date figures, it seems it might just work out correctly by year-end.

The computer does all the maths these days and the payroll staff do not know how the figures are calculated.  

Payroll departments have plenty to do every month.  Often to a strict timetable. As nice as providing explanations would be. Not the resource to offer this service to every employee. 

chrisbur

Hoenir said:

chrisbur said:

ender4 said:

DE_612183 said:

no, your payroll *should* automatically calculate the tax based on HMRC rules.

have you checked your personal tax account online which will show your estimated income for the year.

as an aside - how much is your gross?

With income tax at about 20% with a salary of £100,000 you should be paying about £2,285 tax per month.

Ahhh, i think it's making a bit more sense now. The online personal tax account did show something like £125k earlier in the tax year, but i did change it a few months ago to estimated £99,999.

£87k taxable income earned so far after salary sacrifice and paid £24k income tax so far.

I seem to have paid a massive chunk of tax in the early month when i received my bonus. HMRC must have thought i was going to earn that much every month.  Then they undercharged me for a few months as they realised that was a one-off, then mid-year they may have worked out my full year and started charging on that basis.  

If i ignore the month to month tax and just look at year to date figures, it seems it might just work out correctly by year-end.

The computer does all the maths these days and the payroll staff do not know how the figures are calculated.  

Payroll departments have plenty to do every month.  Often to a strict timetable. As nice as providing explanations would be. Not the resource to offer this service to every employee. 

The need to offer this service is not required by every employee just a few now and then.  During my time in payroll I was always able to explain someone's wages if asked (though had to ask them sometimes to come back later) and that was a weekly payroll with far tighter deadlines than a monthly payroll.
Also the OP advised that "I've asked HR and our payroll people at work, they are stumped and say they they haven't changed anything." not that they did not have time but that they did not know.

Hoenir

chrisbur said:

Hoenir said:

chrisbur said:

ender4 said:

DE_612183 said:

no, your payroll *should* automatically calculate the tax based on HMRC rules.

have you checked your personal tax account online which will show your estimated income for the year.

as an aside - how much is your gross?

With income tax at about 20% with a salary of £100,000 you should be paying about £2,285 tax per month.

Ahhh, i think it's making a bit more sense now. The online personal tax account did show something like £125k earlier in the tax year, but i did change it a few months ago to estimated £99,999.

£87k taxable income earned so far after salary sacrifice and paid £24k income tax so far.

I seem to have paid a massive chunk of tax in the early month when i received my bonus. HMRC must have thought i was going to earn that much every month.  Then they undercharged me for a few months as they realised that was a one-off, then mid-year they may have worked out my full year and started charging on that basis.  

If i ignore the month to month tax and just look at year to date figures, it seems it might just work out correctly by year-end.

The computer does all the maths these days and the payroll staff do not know how the figures are calculated.  

Payroll departments have plenty to do every month.  Often to a strict timetable. As nice as providing explanations would be. Not the resource to offer this service to every employee. 

The need to offer this service is not required by every employee just a few now and then.  During my time in payroll I was always able to explain someone's wages if asked (though had to ask them sometimes to come back later) and that was a weekly payroll with far tighter deadlines than a monthly payroll.
Also the OP advised that "I've asked HR and our payroll people at work, they are stumped and say they they haven't changed anything." not that they did not have time but that they did not know.

Likewise I've accompanied external auditors into an inhouse payroll department that services multiple payrolls and some 19,000 employees in total.

ender4

chrisbur said:

ender4 said:

DE_612183 said:

no, your payroll *should* automatically calculate the tax based on HMRC rules.

have you checked your personal tax account online which will show your estimated income for the year.

as an aside - how much is your gross?

With income tax at about 20% with a salary of £100,000 you should be paying about £2,285 tax per month.

Ahhh, i think it's making a bit more sense now. The online personal tax account did show something like £125k earlier in the tax year, but i did change it a few months ago to estimated £99,999.

£87k taxable income earned so far after salary sacrifice and paid £24k income tax so far.

I seem to have paid a massive chunk of tax in the early month when i received my bonus. HMRC must have thought i was going to earn that much every month.  Then they undercharged me for a few months as they realised that was a one-off, then mid-year they may have worked out my full year and started charging on that basis.  

If i ignore the month to month tax and just look at year to date figures, it seems it might just work out correctly by year-end.

I assume that you are rounding some of the figures as for month 10 on 1257L for exactly £87000 I make the tax to date figure £24323.46
Your assumption about high tax when the bonus was paid and then lower after that is correct but no-one (HMRC nor your employer ) was doing this, it is all in the maths used to calculate your tax.
Your tax allowances for each band are drip fed into the calculation each month 1/12 at a time so that first month you had a lot of higher rate tax deducted but next month when you got another 1/12 of each allowance some of that higher rate tax moved into lower rate tax bands so you got a sort of mini tax rebate which lowered the tax you would normally have paid.  It eventually returns to normal tax figure, so appears to go up.

It is a little disappointing that your payroll dept. could not tell you what was happening; but not surprising.  The computer does all the maths these days and the payroll staff do not know how the figures are calculated.  

Yes, i was rounding to the nearest thousand. 

I work for a small company, 1 HR person and a couple of finance people. They actually send the information externally for the payroll processing which is why they didn't know. I don't think they had asked the external company about it at this stage, they just couldn't see anything wrong from the reports they were looking at.