Impact of old job monthly pay schedule affecting tax liability at new job

24567

Comments

  • neilio
    neilio Posts: 286 Forumite
    First Post First Anniversary Combo Breaker
    I probably have misunderstood. How do I find what the details are of how the new tax has been calculated?
  • You will either been sent a P2 (tax code notice) or can look at the equivalent through your personal tax account on gov.uk.

    It isn't the end number i.e. 789L, that's important here but the make up of the code entries that ends up creating the 789L code.
  • neilio
    neilio Posts: 286 Forumite
    First Post First Anniversary Combo Breaker
    edited 8 September 2018 at 11:11PM
    From gov.uk:

    Total Income Tax estimate
    £20,947

    Your total income from employment is estimated at £76,862 this tax year. You have a tax-free amount for your employment income. This means the first £11,850 of your employment earnings are tax free.

    Income Tax Band / Amount / Tax Rate / Tax
    Tax-free amount / £11,850 / 0% / £0
    Basic rate / £35,033 / 20% / £7,006
    Higher rate / £29,979 / 40% / £11,991

    Additions to your Income Tax

    The following all increase the amount of tax you will pay this year

    Tax adjustment
    Estimate of the tax you owe this year £1,949.60
    (I've been saying £2000 as an approximate figure, number is actually £1949.60)

    What does this mean?

    We think you’ve paid too little Income Tax this year and owe £1,949.60. We’ll start to collect this straight away. We’ll collect £1,949.60 from your taxable income before 5 April 2019. To do this, we’ve reduced the tax-free allowance in your tax code by £8,512 to collect this in equal amounts.

    My old job was paying me under tax code 1211L. My first and most recent pay under my new job was under tax code 1185L. HMRC is telling me my tax code is now 360LX.

    360
    The definition of this part of your tax code is as follows: Your tax-free amount for this employment or pension is £3,600.

    L
    The definition of this part of your tax code is as follows: You are entitled to the standard tax-free Personal Allowance. Your tax code will be updated automatically if the Personal Allowance changes.

    X
    The definition of this part of your tax code is as follows: Your tax is based on your pay in each pay period, not the whole year. This stops you paying too much tax in one go. Your payslip or pension statement could show this as W1/M1, or week1/month 1.
  • Dazed_and_confused
    Dazed_and_confused Posts: 6,458 Forumite
    Uniform Washer
    edited 9 September 2018 at 10:58AM
    There are a few differences which make it difficult to calculate what the correct position should be,

    The total income figure in the code is c£1,500 more than the schedule you have provided.

    Your tax code had approx £260-£270 additional tax free element (1211L instead of 1185L) and this has carried over to the new tax code (360L is £260-£270 more tax free allowance than 11850 - 8512 would be (333L)). Do you know why this is? It could be a single element such as expenses or it could be several things and they can all work slightly differently as far as working out your overall tax position is concerned.

    Ultimately though you are going to get 14 pay days during this tax year and the level of your income results in significant additional income tax being due. If HMRC hadn't adjusted your tax code then when you handed in your P45 to your new employer you would have suffered a massive hit on one pay day, most likely 30/09.

    Going off your schedule your P45 probably shows something like Pay £30195 Tax £6204 and if you add in the payment on 31/08 which was taxed using the emergency tax code then when it comes to 30/09 you would have paid 50% tax on the salary of £5868.33 with an additional £383.64 left to pay the following month because your employer cannot deduct more than 50% tax from each payment.
  • badmemory
    badmemory Posts: 7,788 Forumite
    First Anniversary Name Dropper First Post
    You've now had a wake up call, hopefully this will help you not have this sort of issue again. So much for tax not being taxing. I'm guessing no child benefit in your family.


    I must say I have never come across a pay date of the 6th before. The 5th yes but the 6th seems a little odd!
  • neilio
    neilio Posts: 286 Forumite
    First Post First Anniversary Combo Breaker
    Your tax code had approx £260-£270 additional tax free element (1211L instead of 1185L) and this has carried over to the new tax code (360L is £260-£270 more tax free allowance than 11850 - 8512 would be (333L)). Do you know why this is?

    I have no idea. How does anyone know why?
    badmemory wrote: »
    You've now had a wake up call, hopefully this will help you not have this sort of issue again.

    This implies I have done something wrong. How can I possibly avoid this when it is out of my control? It’s not as a result of anything I have chosen to do, other than change job. It’s not my fault the pay dates of my old job fell on a stupid date in the month that has led to this. What am I supposed to do in future to avoid this then?
  • It would show in the full detail of your tax code.

    The code number your employer uses can be made up of several elements, yours clearly had Personal Allowance and an underpayment deduction but there is something else (or serveral things) which are also being taken into account to get to the 1211L and now 360L.

    And there is nothing unusual in owing tax when you change jobs. This is a fairly regular topic on this board when someone gets paid twice in the same tax month, once by original employer and then again by the new employer. Yours is just an extreme version of this.
  • badmemory
    badmemory Posts: 7,788 Forumite
    First Anniversary Name Dropper First Post
    You've absolutely done nothing wrong, a wake up call only in the sense that most of us go through life ignoring tax & it just goes on in the background year after year. You are now aware that, just like any bill you have to pay, you need to keep an eye on it.
  • neilio
    neilio Posts: 286 Forumite
    First Post First Anniversary Combo Breaker
    edited 10 September 2018 at 11:16AM
    Are tax codes affected by pension contributions? If so, my new employer hadn’t activated my pension contributions in time for my first pay in August but they told me it will be in place for September payday. So could it be that my tax code will change again to something more favourable after my first pension contribution this month? As far as HMRC is concerned, there has been no pension deduction in my new job so is their estimate based on that accordingly?

    I contributed 2.4% to my pension at my old job and my employer contributed 3%. At my new job, I have opted to contribute 10% while my employer also contributes 10%. These will not be 2.4% and 10% of the gross figures I stated above because my base gross salaries are lower due to other allowances I was/am paid. At my old job I was paid an additional allowance of £83.33 gross each month whereas in my new job I am paid other allowances in total of £701.66 gross each month; in both cases the pension is not based on these allowances. I was paid apportions of these allowances in August based on the partial month I worked, likewise for the final pay in September I just received from my old job.

    Also, to clarify, I realise there is nothing unusual about being paid thirteen times in a year when changing jobs. But in normal circumstances, the month of two pay days would equate to one paying for the first part of the month and the other paying for the second part and, I assume, not a big impact on tax contributions. In my case, however, due to the unusual 6th of the month payday cycle, it looks like I have been paid twice for two full months of work in the same month.
  • sheramber
    sheramber Posts: 19,101 Forumite
    First Anniversary I've been Money Tipped! First Post Name Dropper
    If your pension payments are paid under salary sacrifice - i.e payments deducted before tax and NIC- then it doesn't affect your code number.
This discussion has been closed.
Meet your Ambassadors

Categories

  • All Categories
  • 343.2K Banking & Borrowing
  • 250.1K Reduce Debt & Boost Income
  • 449.7K Spending & Discounts
  • 235.3K Work, Benefits & Business
  • 608K Mortgages, Homes & Bills
  • 173.1K Life & Family
  • 247.9K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.9K Discuss & Feedback
  • 15.1K Coronavirus Support Boards