Can somebody explain a tax riddle please?

quickquid

Second job tax code BR

Gross pay is the same as taxable pay. However, National Insurance is also paid. Tax is not paid on NI. So, how can taxable pay be the same as gross pay? I would expect taxable pay to be gross minus NI. I have spoken to three tax advisers at IR - all are very obliging and understand 'where I am coming from' - but nobody can give be me an explanation/calculation. Please help because this is now driving me mad! ::)

robnye

i can only think that you cant split the national insurance initial deductions

do you pay any NI on your second job?

the BR code means you are not allowed any untaxable income, in which case gross=taxable

doenst it ???

MarkyMarkD

Second job tax code BR

Gross pay is the same as taxable pay.  However, National Insurance is also paid.  Tax is not paid on NI. So, how can taxable pay be the same as gross pay? I would expect taxable pay to be gross minus NI.  I have spoken to three tax advisers at IR - all are very obliging and understand 'where I am coming from' - but nobody can give be me an explanation/calculation.  Please help because this is now driving me mad! ::)  

Gross pay = taxable pay is correct.

You don't pay "tax on the NI", but you pay tax on the amount you earn. NI and tax are BOTH deducted from gross pay.

So typical example (if BR tax code):

Pay £100
NI £10 (roughly)
Tax £22

Net Pay £68.

That's correct.

Rafter

You don't get 'tax relief' on national insurance.

So as MarkyMarkD correctly points out if you earn £100 you pay approximately 10% national insurance but you still pay income tax on the full £100.

NI and Income tax are treated totally separately and are both based on your gross earnings. That is the explanation, even if it appears a bit unfair or counterintuitive!

Sorry.

R.

quickquid

Thank you chaps - I understood your explanations straight away. If you guys can explain it so easily, why can't IR? Anyway, once again, many thanks. ;D ;D

Robert_Sterling_3

You don't pay "tax on the NI"

Hmmm.