Tax question. personal allowance.

Jono8 · 13 Sep 2009 at 18:12

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

cymatty · 13 Sep 2009 at 18:13

You will still have the full allowance.

Jono8 · 13 Sep 2009 at 18:14

cymatty said:
You will still have the full allowance.

So it should be divided by 7 then?

cymatty · 13 Sep 2009 at 18:17

Jono8 said:
So it should be divided by 7 then?

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.

Indy500 · 13 Sep 2009 at 18:18

Jono8 said:
So it should be divided by 7 then?

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.

timaloy · 13 Sep 2009 at 18:18

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

Jono8 · 13 Sep 2009 at 18:19

how do i make sure its going to be correct? Or willl i just have to wait for a rebate

cymatty · 13 Sep 2009 at 18:19

sr4470 said:
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.

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

markweatherill · 13 Sep 2009 at 18:24

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.

Jono8 · 13 Sep 2009 at 18:26

markweatherill said:
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.

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?

markweatherill · 13 Sep 2009 at 19:04

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')

Jono8 · 13 Sep 2009 at 19:05

markweatherill said:
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')

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

markweatherill · 13 Sep 2009 at 19:18

Jono8 said:
So i might no pay any tax this year until i have earnt £6475??

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.

Jono8 · 13 Sep 2009 at 19:24

markweatherill said:
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.

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

markweatherill · 13 Sep 2009 at 19:35

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!

Jono8 · 13 Sep 2009 at 19:40

markweatherill said:
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!

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