Graduate Job Tax Question

[nixon1905]

Hi guys, just wanted a bit of help understanding the situation I will be in come the start of my new job.

Fresh out of university and I have a job beginning in late September with a salary of £25k and a joining bonus of £1.5k, this will be my first job since the beginning of the tax year (April if I am correct?)and have had no other income other than student loans.

So what I am asking is, will I only be taxed once I reach the threshold for the entire financial year, or will I be taxed each month based on my annual salary despite not earning the entire £25k (or £26.5k) in this current tax year? Obviously it would be beneficial for me to have the former arrangement as I would be taxed on a smaller amount?

Massively confused at the moment so any help is appreciated!

[Condi]

You'll be taxed based on a % of the full year salary. So for example if you joined exactly 6 months through the tax year HMRC will assume you will earn 1/2 of the 26.5K and tax accordingly. Tax free allowance of £7k gives you taxable income of 5.5k. Taxed at 20% you would be paying £1000 in tax spread over 6 months. So from a salary of 2200/month you would lose £166/month in income tax. Plus NI, student loan etc.

Obviously if you have had any other job throughout the tax year this will be null and void, as you will have already used some of your tax free allowance.

[trickywoo]

Depending on how the joining bonus is treated you are likely to be taxed too much (at least initially) while HMRC sort out your tax code.

Make sure you keep all your pay slips as you may have to reclaim any over paid tax after next 5th April.

[Lauryn]

Your personal allowance this year is £9,440. This should be spread over the year from when you start earning until 5 April 2014 but in reality there will most likely be a small overpayment at some point as your first wage will be chunky and it might not balance out at first. You are entitled to earn that amount tax free from now until the end of the fiscal year though.