calculating tax

builder22 · 24 Sep 2014 at 19:54

so, my tax code is 1000l, so can make 10k that's tax free

but how do they calculate it?

when I had a full time job the tax/national insurance was about the same every month, as soon as the tax year starts I was being taxed the same as the rest of the year - even though I hadn't reached £10k yet

is it because they know your salary?

Ogoshi · 24 Sep 2014 at 20:00

Yes. You don't go x months paying no tax if payroll know you're going to exceed 10k during the year. I'm sure somebody here will have the better detail!

Ragnahex · 24 Sep 2014 at 20:04

am pretty sure if it is full time they estimate the amount you will earn and take tax per month so you don't get raped later on in the year. If you overpay tax then you receive a tax rebate anyway so it's all good (just received £900 rebate the other day)

builder22 · 24 Sep 2014 at 20:17

so if it's random shifts through an agency then it won't be until you reach 10k?

or do they still try estimate your earnings?

PhilGQ · 24 Sep 2014 at 20:25

The payroll software takes your personal allowance and divides it by the number of pay days in the year. So the first £833.33 in each month is not taxed if you work for a whole year.

If you started in the middle of the year or had a few months out between jobs, you may get an adjustment the first few months to bring it back into line.

NI is done differently and has different thresholds.

PhilGQ · 24 Sep 2014 at 20:30

builder22 said:
so if it's random shifts through an agency then it won't be until you reach 10k?

or do they still try estimate your earnings?

If it is under the £833.33 (if paid monthly) or £192.31 if paid weekly there should be no tax, if is more you would pay tax on the bit above.

If you did a few weeks without work (i.e no pay), the next payday should adjust it for the allowance you missed out on. Which could be you pay less tax or get a rebate.

Semple · 24 Sep 2014 at 20:38

The tax is normally adjusted each month. Typically it gets messed up when receiving a bonus, as HMRC suddenly assume the sudden increased payment that month will continue for the remainder of the tax year.