I Need Help With My Tax Code

liam191

Hello everyone, I'm currently a student and will be starting work in September, I wont be earning any money from the start of the new tax year (april 08) til September 08 and I've been told something that because I wont be working for 6 months of the 08-09 tax year the first pay packet i receive will be tax free or something like that...does any one know about this? Do i need to tell my employer a certain tax code?? Any help is appreicated, cheers, Liam

dmg24

Do you know how much you will be earning when you start work?

mitchaa

You will automatically be put on the standard tax code of 543L like the majority of UK PAYE employees.

However, the way PAYE normally works is you will probably pay tax from your wage and then if you've not earned £5435 or more by the time April 09 comes you'll get it all back in a rebate.

I suppose it depends on how much you'll be earning and if its likely you'll go over the £5435 limit as to whether or not you'll get tax deductions. PAYE may well ignore you if it looks like you'll get no-where near the £5435.

System

You need to complete a P46 - http://www.hmrc.gov.uk/forms/p46.pdf and tick box A on the front. Your employer will then know to operate a cumulative code of 543L. They will then use their tax tables to calculate how much tax to deduct from you if any.

543L equates to a tax free amount of £5435 for the 2008/09 year or approximately £104.52 per week during a that year. If you don't work or claim taxable benefits until 1st September then that means you will not have had the benefit of

21weeks x £104.52 = £2194.92 tax free

so at the end of your first week you would need to have earned more than £2194.92 + £104.52 (week 22) = £2299.44 before tax would be due from you.

Note if your employer operates 543L W1/M1 which is a non-cumulative code then that means they are not taking into account what you did or didn't earn prior to you starting work with them and they will tax you immediately your income exceeds £104.52 from the very beginning.

So if this happend and say you earned £110 per week then by the end of the tax year you would have been taxed on

£110 x 31 weeks = £3410.

£3410 is obviously less than your tax free allowance of £5435 so you would be entitled to a refund.

HTH

CLAPTON

when you start work you will need to fill in a P46. your employer will probably put you on an emergency code initially, however the HMRC will allocate 543L in due course.

depending upon your earnings you will be due little or no tax for the first few months (except maybe the first if on an emergency code)

once you are on a 543L code your tax will work out correctly and there will be no need to claim any refunds.

CarolynH

Clapton's spot on.

liam191

hey guys, yes i'l be starting on £26,800 does that affect anything??

liam191

After reading all your comments again (thanks guys) so when i start work i need to fill in a P46 tick A for code 543L and then my first months salary (£26,800 p.a) will be tax free and maybe even my second one???

CLAPTON

not as good as that


in september your gross salary is 26800/12 = 2233
if you pay into a company pension then the amount comes off gross

assuming no comapny pension then

your accumulated tax free allowance prorataed will be

5435 x 6 /12 (six months' worth) = 2717 so NO tax that month
but you pay NI contributions
2717 - 455 = 1778 x 11% = £195

October your year to date grosss income is 4466
your accumulated tax free allowance is 5435 x 7 /12 = 3170

so you pay tax at 20% on 4466-3170 = 1296
so actual tax deduction is £259
you also pay NI as above

thereafter you are paying full tax


and of course after april 09 you will be repaying your student loan if applicable.

liam191

CLAPTON wrote: »

not as good as that


in september your gross salary is 26800/12 = 2233
if you pay into a company pension then the amount comes off gross

assuming no comapny pension then

your accumulated tax free allowance prorataed will be

5435 x 6 /12 (six months' worth) = 2717 so NO tax that month
but you pay NI contributions
2717 - 455 = 1778 x 11% = £195

October your year to date grosss income is 4466
your accumulated tax free allowance is 5435 x 7 /12 = 3170

so you pay tax at 20% on 4466-3170 = 1296
so actual tax deduction is £259
you also pay NI as above

thereafter you are paying full tax


and of course after april 09 you will be repaying your student loan if applicable.

ahh ok, so do i not start paying back my student loan in September then???

CLAPTON

from april 09 at 9% on the amount above 15,000