Potentially Stupid Question about income tax

[Yadizzle1]

I have a summer job at the moment where I will be taking home a little less than £1000 a month. This will be my first job this tax year and I was wondering, will I be taxed monthly from the first month I start working or will they only start charging me tax after I have earnt £10600 in the year, i.e after 11 months?

Any help is much appreciated

[Eric Mc]

Have you any other income such as another job?

[Yadizzle1]

Eric Mc said:

Have you any other income such as another job?

No, this is my first and only job in this tax year.

[Dr Jekyll]

They will calculate how much tax and NI you will owe for the tax year if you earn the same every month until the end of the year, then charge a proportion of that every month. If you really do earn the same every month then the deductions will stay constant. If your pay would add up to sufficient to pay tax should it continue and then you quit and don't earn enough to pay tax you will get a rebate after the end of the tax year.

[Doofus]

Yadizzle1 said:

I have a summer job at the moment where I will be taking home a little less than £1000 a month. This will be my first job this tax year and I was wondering, will I be taxed monthly from the first month I start working or will they only start charging me tax after I have earnt £10600 in the year, i.e after 11 months?

Any help is much appreciated

Essentially, they divide the 10,600 by 12, and look at each month individually. So, if in month 1, you earn more than 10,600 ÷ 12, you'll pay tax on the bit over that amount. Then they do the same each month.

In practice, it's done cumulatively, but in essence, it's as I described above.

Plus you have NIC too.

[Yadizzle1]

Dr Jekyll said:

They will calculate how much tax and NI you will owe for the tax year if you earn the same every month until the end of the year, then charge a proportion of that every month. If you really do earn the same every month then the deductions will stay constant. If your pay would add up to sufficient to pay tax should it continue and then you quit and don't earn enough to pay tax you will get a rebate after the end of the tax year.

Brilliant, thanks! In regards to the rebate, when can I expect to get it? I am owed a rebate from last year, but have not yet received a P800 tax calculation.

[Yadizzle1]

Doofus said:

Essentially, they divide the 10,600 by 12, and look at each month individually. So, if in month 1, you earn more than 10,600 ÷ 12, you'll pay tax on the bit over that amount. Then they do the same each month.

In practice, it's done cumulatively, but in essence, it's as I described above.

Plus you have NIC too.

Perfect, thanks!

[Eric Mc]

The allowance for tax year 2016/17 is £11,000 (not £10,600) so your monthly Tax Free Pay should be £916.67 £11,000 x 1/12).

Keep a sharp eye on your PAYE Tax Code. If your employer is using the full allowances of £11,000, you PAYE Tax Code will be 1100L.

If the code is NOT this amount, you may overpay or underpay tax.

[oop north]

The descriptions above are not quite correct: income tax is calculated on a cumulative basis during each tax year (usually - sometimes special codes are applied to take a straight 20% off all your pay, or (if I remember correctly) apply the tax as if it is April / month 1 every month so not cumulative). So, if you start in a new job during May, you will get the tax free allowance for April and May in month one compared to your Maybearnings. Then in June, you have compared your May and June pay with the tax free allowance for April, May and June. Etc

National insurance is different - that is always calculated per pay period, unless you are a company director (when it's s annual).

[Mattt]

If applicable, use a P38 form and all your pay will be tax free.