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Tax question. personal allowance.

Discussion in 'General Discussion' started by Jono8, 13 Sep 2009.

  1. Jono8

    Caporegime

    Joined: 20 May 2007

    Posts: 33,485

    Location: Surrey

    Hi guys

    Started a new job 2 weeks ago after being at University and unemployed for 2 and half months. I am a little confused about how my personal allowance will be worked out. I get paid monthly so i realise it would be divided by 12 for a whole tax year, however i havent earnt anything so far this year so I still have my whole personal allowance left as far as i understand.


    Will this mean that my personal allowance should be divided by 7 (months remaining in this tax year)?

    Or will I just effectively have a personal allowance of about £3500 instead and have missed out on the allowance for the first half of the year?

    government website isnt very clear.



    Cheers

    JT
     
  2. cymatty

    Capodecina

    Joined: 27 Sep 2004

    Posts: 13,305

    Location: South Yorkshire

    You will still have the full allowance.
     
  3. Jono8

    Caporegime

    Joined: 20 May 2007

    Posts: 33,485

    Location: Surrey

    So it should be divided by 7 then?
     
  4. cymatty

    Capodecina

    Joined: 27 Sep 2004

    Posts: 13,305

    Location: South Yorkshire

    Yes, although it may take a few months to sort out the tax, you may pay too much in the first few months then it will sort itself out.
     
  5. Indy500

    Capodecina

    Joined: 7 Mar 2005

    Posts: 17,509

    This is where you'll discover PAYE is a terrible way of paying tax. Deductions are made on the assumption that your weekly or monthly pay will continue throughout the tax year.
     
  6. timaloy

    Gangster

    Joined: 8 Aug 2008

    Posts: 480

    Location: glasgow, scotland

    tax will always take their time whne paying money back the scumbags
     
  7. Jono8

    Caporegime

    Joined: 20 May 2007

    Posts: 33,485

    Location: Surrey

    how do i make sure its going to be correct? Or willl i just have to wait for a rebate :(
     
  8. cymatty

    Capodecina

    Joined: 27 Sep 2004

    Posts: 13,305

    Location: South Yorkshire

    Yep although he should get it back, if not then you need to complete a R40 http://search2.hmrc.gov.uk/kbroker/hmrc/forms/start.jsp
     
  9. markweatherill

    Mobster

    Joined: 16 Jun 2009

    Posts: 2,567

    Location: Bucks

    PAYE is 'cumulative'. You get 1/12 of your allowance each month.
    In April your tax is calculated by your pay-to-date (one month!) against 1/12 x allowance.

    In September (for example) your earnings from April to September are compared with 6/12 of your allowance and tax is calculated on the difference and a deduction (or refund) made, based on tax-paid-to-date.

    So every month your pay section will operate PAYE using pay-to-date, your cumulative allowances and tax paid-to-date. You pay (or get back) the appropriate amount.
     
  10. Jono8

    Caporegime

    Joined: 20 May 2007

    Posts: 33,485

    Location: Surrey

    So I still have my full personal allowance as I havent earnt anything so far this tax year? So my remaining personal allowance will be divided by the remaining months in this tax year (7) so each month I will get a personal allowance of £6475 divided by 7?
     
  11. markweatherill

    Mobster

    Joined: 16 Jun 2009

    Posts: 2,567

    Location: Bucks

    Not quite. In Month 6 of the tax year your pay section will work out the tax due on your pay to date compared with 6/12 of your allowance and tax paid to date. It's always divided into 12ths for monthly pay.
    So you get the situation of perhaps not paying any tax until your pay in the tax year catches up with and exceeds your cumulative allowance.
    (This all assumes the employer is operating the tax code cumulatively and not 'emergency tax')
     
  12. Jono8

    Caporegime

    Joined: 20 May 2007

    Posts: 33,485

    Location: Surrey

    So i might no pay any tax this year until i have earnt £6475??
     
  13. markweatherill

    Mobster

    Joined: 16 Jun 2009

    Posts: 2,567

    Location: Bucks

    Until you have earned more than the fraction of your allowance for that month.
    eg in Month 6, your pay to date is compared with 6/12 x 6475.

    Forgive my rusty explanation, it's been a few years since I worked for HMRC.
    :)
     
  14. Jono8

    Caporegime

    Joined: 20 May 2007

    Posts: 33,485

    Location: Surrey

    Um..I think i get it. So i wont pay tax in september unless i have earnt over £3237?
     
  15. markweatherill

    Mobster

    Joined: 16 Jun 2009

    Posts: 2,567

    Location: Bucks

    That's it - and so on for the remainder of the tax year but using 7/12 x 6475 for October, and so on. And subject to the employer not using 'emergency tax' or anything.

    I just checked on the HMRC website to make sure I'm not typing nonsense, and ....they kind of gloss over how it works!
     
  16. Jono8

    Caporegime

    Joined: 20 May 2007

    Posts: 33,485

    Location: Surrey

    Cheers! Yeh i didnt find the .gov websites that hepful to be honest!