Yet another tax question

moaner

moaner

moaner

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14 Dec 2011
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Some background first
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I received a change of tax code notice from HMRC in August 2011 telling me my tax code was changing to 714L because I have private health care with my employer. My code changed from September 2011 pay onwards (I get paid monthly).

The Detail
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This month, I get a bonus and am also getting a pay rise which is backdated to the 1st October 2011. So the figures on my payslip are;

Monthly Salary: 3052
Bonus: 2700
Back Pay: 500

On this I have paid tax of £1679.06 and NI of £406.80. The NI is probably ok but the tax seems extremely high to me. On a "normal" pay, I would expect to be about £450 in tax (up to £490ish with pay increase). So my gross salary has increased by 2x for this month but my tax has increased by about 3.7x :eek:

I was told my tax code was 714L but it is actually 714L M1. This is obviously to catch up on payments I'm due for tax on the healthcare insurance benefit but I'm assuming my tax code was set at this on the assumption my monthly pay was the same throughout the tax year. However on this one month, I seem to be getting hammered for tax!!

My employer has said the tax is right, which is correct, the tax paid is the correct amount but what I'm getting at is surely the amount of tax I've paid this month is over and above what I should have paid whilst catching up on tax for my private healthcare.

Not sure if you follow this or not but do you get what I mean and do you think I've paid too much tax?
 
moaner said:
do you think I've paid too much tax?
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No - looks like the bonus this month might have tipped you into the 40% tax bracket for that month. It'll even itself out later due to the way the PAYE system works.

If in doubt, speak to HMRC, not your employer.
 
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Yeah, but I'm on an M1 code which ignores previous months pay. My employer has checked my January payslip and says it has returned to normal, not that I'm getting any rebate or anything.
 
No, in fact if anything I would say you haven't paid enough tax!

It's strange why you would be on a month 1 code, as this is non-cumulative, so you have only paid tax on this months earnings, and not any more tax on your earnings from Apr-now.

And while it still is on month 1 it wont correct itself as Amigafan suggests, if it has ticked into the 40% bracket.
 
Looks about right for the month and it has ignored the M1 bit. PAYE calculates on your monthly earnings as if they are average. Your total pay for the month is equivalent for someone on £75k per year who would pay about £1600 per month in tax every month.

Should balance out in the remaining months.
 
It doesn't look unreasonable to me, but without doing a bunch of maths that I can't be arsed with, I can't say for sure.

Worst comes to the worst, the tax year end is just over 3 months away, so you can check the amounts for the whole year then and claim a repayment from HMRC if needs be.
 
Freakbro said:
It would balance out if he wasn't on a Month 1 code, but since he is then it wont balance out.

I would check the tax office did assign a 714L M1 and that the payroll dept didnt put the M1 on as a mistake.
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The code is correct, the woman that does the payroll should me the notice they received from the tax office.
 
moaner said:
The code is correct, the woman that does the payroll should me the notice they received from the tax office.
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Ok, then as Von says above, just wait till the end of the tax year and contact HMRC to sort it out. They will calculate what you should have paid in the year and either give you a bill or a rebate :)
 
My first question would be.. since this is not moneysupermarket or anywhere like that, why ask questions about taxation, on a predominantly 'tech' forum? Doubly so since these are your first posts..

You're a bit odd aren't you?
 
Ceryndrion said:
My first question would be.. since this is not moneysupermarket or anywhere like that, why ask questions about taxation, on a predominantly 'tech' forum? Doubly so since these are your first posts..

You're a bit odd aren't you?
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Though it's titled "Yet another...." which would indicate he has working knowledge of the forum.

I didn't spot it was a new user....maybe long time reader but finally joined....or banned member perhaps? ;)
 
Ceryndrion said:
My first question would be.. since this is not moneysupermarket or anywhere like that, why ask questions about taxation, on a predominantly 'tech' forum? Doubly so since these are your first posts..

You're a bit odd aren't you?
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Well, there's several people who work day to day in tax, specifically me, Kemik and Pudney, plus various others who work in accounting so have some tax knowledge, plus others who appear to work in payroll.

So asking here is easier than registering for MSM and asking there, surely?

EDIT: Just seen it's a new user. Well, big deal, frankly.
 
Freakbro said:
Though it's titled "Yet another...." which would indicate he has working knowledge of the forum.

I didn't spot it was a new user....maybe long time reader but finally joined....or banned member perhaps? ;)
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Lol, long time lurker :D Nothing sinister you conspiracy theorists!!
 
Freakbro said:
Though it's titled "Yet another...." which would indicate he has working knowledge of the forum.

I didn't spot it was a new user....maybe long time reader but finally joined....or banned member perhaps? ;)
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The fact that he calls himself "moaner" suggests he knows how it works here :D
 
http://listentotaxman.com says you are about right. Your tax will be a higher percentage as with the bonus you're firmly into the 40% bracket.

Next month, assuming you're not still on M1, the new calculation of total pay and total tax should mean you pay a little less than normal. If you stay on M1 then it won't get sorted out until April.
 
Telescopi said:
http://listentotaxman.com says you are about right. Your tax will be a higher percentage as with the bonus you're firmly into the 40% bracket.

Next month, assuming you're not still on M1, the new calculation of total pay and total tax should mean you pay a little less than normal. If you stay on M1 then it won't get sorted out until April.
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Thanks. I'm on the M1 until the end of the tax year so I guess I'll just wait until then to sort it out. Do they tend to "sort it out" automatically or do you have to chase it up yourself?
 
moaner said:
Thanks. I'm on the M1 until the end of the tax year so I guess I'll just wait until then to sort it out. Do they tend to "sort it out" automatically or do you have to chase it up yourself?
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I don't see why they'd put you on M1 to correct the missing insurance benefit earlier in the year, if they left you as it is you'd just catch up your tax this month - putting you on M1 means you'll owe tax at the end of the year.

Obviously with the bonus it'll probably just mean you are owed slightly less, I can't see you having underpaid by more than a couple of hundred this year and as your full year pay should still be under 46k (I assume no more bonuses are expected?) you should expect more than that back off this months.

I'd give them a call and see what's what, you might be able to sort it out before April if they will issue you with a 714L code (no M1).
 
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