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PAYE not included
Hi, I'm hoping this is the best section for this question.
I'm a student who has just started my year in industry. I got my first paycheck the other week, however no tax was taken from it. My fellow undergrads at the company have had all theirs taken off.
Is there a reason why this has happened? Or is it just a mistake?
Who would I contact in order to correct this issue?
Thanks in advance!
Andy
I'm a student who has just started my year in industry. I got my first paycheck the other week, however no tax was taken from it. My fellow undergrads at the company have had all theirs taken off.
Is there a reason why this has happened? Or is it just a mistake?
Who would I contact in order to correct this issue?
Thanks in advance!
Andy
Answers
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You're allowed to earn �6475 tax free in the current tax year.
That allowance equates to �124.52 per week.
Last week was Week 18 in the tax year.
18 x �124.52 comes to �2241.36.
For anyone who's earned more than that, so far in this tax year, here's what happens:
The system subtracts �2241.36 from their earnings. The rest is taxable at 20%, so the system calculates 20% of their 'taxable earnings'. (That shows how much tax they should have paid up until the end of Week 18).
The system then looks at how much tax they've already paid this year, and calculates the difference (which is how much tax they must now pay).
For anyone who's earned less than �2241.36, so far, in the current tax year, there will be no tax to pay. (Lucky you!).
You won't start paying tax until your total earnings exceed the number of weeks into the tax year multiplied by �124.52
Chris
That allowance equates to �124.52 per week.
Last week was Week 18 in the tax year.
18 x �124.52 comes to �2241.36.
For anyone who's earned more than that, so far in this tax year, here's what happens:
The system subtracts �2241.36 from their earnings. The rest is taxable at 20%, so the system calculates 20% of their 'taxable earnings'. (That shows how much tax they should have paid up until the end of Week 18).
The system then looks at how much tax they've already paid this year, and calculates the difference (which is how much tax they must now pay).
For anyone who's earned less than �2241.36, so far, in the current tax year, there will be no tax to pay. (Lucky you!).
You won't start paying tax until your total earnings exceed the number of weeks into the tax year multiplied by �124.52
Chris
Is that right, Chris? Maybe I misunderstood what you've said but before long I think HMRC/ the payroll department will calculate how much income Andy is likely to earn in the tax year and if the figure exceeds the annual tax allowance then they work out the monthly tax deduction.
Andy- I think you should have been asked to complete an HMRC form used when no P45 is available, and you should have a tax code. If you are concerned that you seem to be being treated differently than colleagues for tax purposes then contact your payroll/HR dept or your HMRC tax office or ring teh HMRC helpline. My guess is that by next month you will start to get tax deducted, unless your earnings by 6 April 2010 are projected to be less than �6475.
Andy- I think you should have been asked to complete an HMRC form used when no P45 is available, and you should have a tax code. If you are concerned that you seem to be being treated differently than colleagues for tax purposes then contact your payroll/HR dept or your HMRC tax office or ring teh HMRC helpline. My guess is that by next month you will start to get tax deducted, unless your earnings by 6 April 2010 are projected to be less than �6475.
Speak to whoever does the payroll, perhaps the other students had done previous paid work in this tax year.
(In my experience, if paid monthly, and starting part way through a tax year, you still only got 1/12 of your yearly tax allowance discounted against your monthly salary and claimed a tax rebate at the end.)
(In my experience, if paid monthly, and starting part way through a tax year, you still only got 1/12 of your yearly tax allowance discounted against your monthly salary and claimed a tax rebate at the end.)
Factor - it does work the way Chris described.
The historic details of the earnings in the tax year to date get pulled off the P45 (if there is one) OR the employee should get asked to complete a P46 by the employer if there's no P45. Depending on the answers given by the employee, HMRC have clearly defined instructions to employers on what tax they should then deduct.
In Andy's case, because he will declare he's had no earnings in the tax year to date, it will calculate exactly as Chris describes.
The historic details of the earnings in the tax year to date get pulled off the P45 (if there is one) OR the employee should get asked to complete a P46 by the employer if there's no P45. Depending on the answers given by the employee, HMRC have clearly defined instructions to employers on what tax they should then deduct.
In Andy's case, because he will declare he's had no earnings in the tax year to date, it will calculate exactly as Chris describes.
HC - I'm intrigued by your comments.
A personal tax allowance of �6475 does precisely mean that �6475 can be earned before paying tax.
However if the employee earned the �6475 in the very first week of the tax year, the way the PAYE system works means one would pay shed-loads of tax in the first week, then get PAYE rebates each and every week of zero earnings. If that's what you meant, then I agree.
PAYE means precisely that - pay as your earn - with the HMRC system calculating one's year to date earnings. It does not project an assumption that the YDT earnings will continue to YE - it merely recalculates every time more pay data is fed in.
A personal tax allowance of �6475 does precisely mean that �6475 can be earned before paying tax.
However if the employee earned the �6475 in the very first week of the tax year, the way the PAYE system works means one would pay shed-loads of tax in the first week, then get PAYE rebates each and every week of zero earnings. If that's what you meant, then I agree.
PAYE means precisely that - pay as your earn - with the HMRC system calculating one's year to date earnings. It does not project an assumption that the YDT earnings will continue to YE - it merely recalculates every time more pay data is fed in.
What I was meaning is that if you start work for the first time in August and earn �300 a week you should expect to pay some tax before too long. The payroll doesn't wait until you've earned �6475 before tax starts to be deducted.
I think Chris is saying that you won't pay tax until your year to date earnings reach a figure (currently �2241 this week) which is based on weekly tax allowance multiplied by current taxeek number.
I didn't know it worked that way but Chris and Buildersmate usually know their stuff so I'm sure they are right. It does mean, though, that tax paid is nil at first then increases later on- I would have thought teh tax man would want teh tax earlier or would try to smooth the tax take
I think Chris is saying that you won't pay tax until your year to date earnings reach a figure (currently �2241 this week) which is based on weekly tax allowance multiplied by current taxeek number.
I didn't know it worked that way but Chris and Buildersmate usually know their stuff so I'm sure they are right. It does mean, though, that tax paid is nil at first then increases later on- I would have thought teh tax man would want teh tax earlier or would try to smooth the tax take
That's exactly how it works factor.
Chris has explained it entirely accurately. Under PAYE your tax free allowances are split over your pay periods (52 weeks or 12 months) and given in blocks effectively. They accumulate though and if you start work in August you have to earn more than 6/12ths of the tax free allowance before you pay any tax at all.
Chris has explained it entirely accurately. Under PAYE your tax free allowances are split over your pay periods (52 weeks or 12 months) and given in blocks effectively. They accumulate though and if you start work in August you have to earn more than 6/12ths of the tax free allowance before you pay any tax at all.
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