Tax help please

[meglet]

I posted this question a few weeks back:

http://www.theanswerbank.co.uk/Law/Question526 433.html

I've now received my second pay check and have been taxed an awful lot. I may as well just tell you what the figures are as it might make more sense.

Feb pay (new job so 3 weeks pay):
Total pay = �5217.70
Tax code = M1 BR
Deductions - Tax = �1147.74, NI = �294.73

Mar pay
Total pay = �7355.00
Tax code = 494L
Deductions - Tax = �3174.97, NI = �316.10

Is the large amount of tax I paid this month paying back the higher rate I didn't pay last month? Thanks in advance.

[dzug]

Whilst I haven't followed the calculations through in detail - yes, that is the most likely explanation.

I think the answers to your earlier question didn't anticipate you would be earning so much!!

[factor-fiction]

You will pay lot of tax on earnings that high, but we can't answer it without knowing your full year position and why you have a code M1 BR.
You really are better asking the tax man than telling us all how much you earn.

[meglet]

Thanks dzug (always wonder how to pronounce that!). I did say that I was a higher rate tax payer. It did gall me paying nigh on half my pay and I was wondering if it was worth a call to the tax office. Presumably it will even itself out next month.

[dzug]

Durchgangszug is what it's an abbreviation for (I think) - make what you will of that.

April's pay will be 'normal' - even if they messed March's up - a possibility but unlikely. It's a new tax year and there are no adjustments to screw things up if not done right.

[buildersmate]

The figure in February looks right but March looks too high.

February. Tax deducted using BR code, which means basic rate. 22% of �5217 is �1147.

March approx figures
Tax paid in this month should correct the position over the two months Feb and March.
Tax free pay, using 494 code is �412 per month.
Gross pay over the two months is �5217 + �7355 = �12572.
Pay on which tax is payable is �12572 - �412*2 = �11748
Tax of 10% is paid on about the first �400 (over the 2 months) = �40
Tax of 22% is paid on the next �5770 = �1269
Tax of 40% is paid on the rest (�5578) = �2231.
Total tax due over the 2 months = 40+1269+2231 = �3540
Less �1147 paid in Feb
March tax should have been �2400 approx?

[Androcles]

Do you need somebody to carry your wallet?

[meglet]

Buildersmate thanks very much. Its worth a call to the tax office I think.

Factor30, it seems you didn't the thread I pasted explaining it was a new job.

[buildersmate]

If my calc is roughly right you will almost certainly have to get the refund from your P60, once you receive it from your new employer, via the Tax Office.

[factor-fiction]

Meglet- I refer to your comment: "Factor 30, it seems you didn't the thread I pasted explaining it was a new job. "
It may have been a new job but you haven't said whether it was the only job you've had this tax year (in which case no higher rate tax would be due) or what your previous earnings were. In March you had a normal tax code of 494L. It could be that in March the taxman was clawing back underpaid tax from earlier in the tax year. We don't have enough information to comment on that do we? Hope you get it sorted- it always seems harsh when you work hard and pay so much tax- I recently got a nice bonus for putting in significant additional time and effort which was nice but then nearly half went to the taxman.

[buildersmate]

Agreed, Factor. I accept that my calcs are based on the premise that at the end of January Meglet had had deducted the correct amount of PAYE income tax for his/her earnings in the current year as at end Jan, based on the coding of 494.

[meglet]

factor and builders, there aren't any unusual circumstances so there should not be a claw back. Payroll tell me the deductions are correct so I have sent the figures that buildersmate posted to tell me why theirs are different.

Thanks again for your input.

[bushbaby_de]

This may help - when you start a new job they base their calculations on what your tax liability would be if you earned that amount every month for a whole year and they will not at that stage have any information on what you have already been taxed for that year or what your total earnings were. So they tax you at a higher rate because its preferable for them to over tax you rather than undertax you to ensure the taxman doesn't miss out. They usually have the info and make the adjustments by month two or three and put everything right for you, although this may take longer given that its the end of the tax year. HTH

[moomintroll1]

In order to calculate the correct amount of tax due, you need to take into account your total income to date, which will include any pay from a previous job or jobs since April 2007.

The previous calculations haven't taken this into account.

Your March payslip should have some "To Date" figures. If you post the "Gross Pay To Date" and "Total Tax To Date" figures, we can check to see if they're accurate.

You are correct in thinking that you were only taxed at the basic rate in February (which wasn't enough) and so, in March, you had to pay the extra to make it up to 40% on the higher rate income. Given this, I'm afraid you probably aren't due a rebate. Sorry!

[meglet]

Thanks moomintroll. I had a response back from payroll today (I had sent them buildermates figures to check) and, while I didn't get a chance to look at them in depth, it seems that once they got my P45 they took into account all pay up until I started the job and this the tax is correct. Roll on the new tax year.