How will tax work here.

muon · 18 Oct 2009 at 14:40

I will be graduating September 2010 and was curious how tax would work for part years.

So tax years are April to March each year.

Say I start a job in September and earn an amount which is above the personal allowance threshold over the remaining tax year.

How do you go about setting it up so that for your job from September to March you only pay tax (income and NI) at the rate given income for that tax year rather than weekly/monthly income extrapolated? Can a similar thing be done for student loan repayments.

Or is the only way possible via a tax refund?

http://www.hmrc.gov.uk/incometax/understand-refund.htm

If so, does my money earn interest while it is held by HMRC.

This emergency tax code business mentioned here

http://www.hmrc.gov.uk/incometax/emergency-code.htm

isn't explained very well. Can someone help describe what it means please.

Thanks.

philjohn · 18 Oct 2009 at 14:54

If you are employed it will all be taken care of with PAYE. At first you'll probably be on an emergency tax code until HR can find out how much (if any) money from employment you've made to date in the current tax year.

Deadbeat · 18 Oct 2009 at 15:03

Your money doesn't earn interest while held by HMRC. On the other hand, you don't have to wait until April to get it back - should be sorted within the first couple of months.

Vonhelmet · 18 Oct 2009 at 15:05

Your personal allowance will be spread over the months you're working. You shouldn't need to claim a repayment, or pay emergency tax or anything if payroll sort themselves out.

There is no allowance as such for student loans. You'll just pay 9% of your earnings over 15k per year, or 1250 per month.

muon · 18 Oct 2009 at 15:08

Ok thanks for the information guys.

vonhelmet said:
Your personal allowance will be spread over the months you're working. You shouldn't need to claim a repayment, or pay emergency tax or anything if payroll sort themselves out.

There is no allowance as such for student loans. You'll just pay 9% of your earnings over 15k per year, or 1250 per month.

So I will basically start paying 9% on every pound above £1250 a month, irrespective of what I actually earn gross that tax year?

Vonhelmet · 18 Oct 2009 at 15:20

ghost101 said:
Ok thanks for the information guys.

So I will basically start paying 9% on every pound above £1250 a month, irrespective of what I actually earn gross that tax year?

I think so, yeah. I'm pretty sure student loan is done on a monthly basis.

chippie · 18 Oct 2009 at 15:28

As you won't have worked for the first part of the tax year, you won't have a P45, so when you start employment, you should complete a form P46, and tick box A. That means you will be put on the standard cumulative code, and will receive the benefit of all of your personal allowance, and will pay the correct amount of tax for the year.

NI is calculated weekly, or monthly, and is per period, not cumulative, so will always pay the right amount.

Student loan - If you tick box D on the P46, then your employer will deduct student loan payments if your earnings are more than the threshold (£1250 per month).