PAYE and Tax

[theboyfold]

Not too clued up on the topic of tax and PAYE etc, but I've just been told I've been on the emergency tax code for the last 16 months! What's the difference with this and the normal tax codes?
Am I due a refund for the previous year?
If so how much would it likely be per £1k?
Or does it make a difference how much you earn?

Cheers!!

[Size Nine Elm]

IIRC it means they assume you have other earnings, so they discount any allowances for NI or tax, and charge you the basic rate on everything you earn.

So if you earn £15k, instead of deducting your ~£5k allowance, and your £2k 10% band, they charge you 22% on the lot - and NI on the lot too, instead of your ~£5k threshold.

i.e. Worth a few grand after 16 months.

HTH

[Eric Mc]

Are you on a proper tax coding now and, if not, why not?

If you are still on BR (Basic Rate) or Emergency Tax for the current tax year (2005/06), if you get your tax code sorted before 5 April 2006, you should get any tax overpaid in the 2005/06 year repaid to you through your salary. Any tax overpaid for 2004/05 or earlier will have to be sorted by contacting your tax office and explaining the situation to them. For your information, the normal tax code for individuals for 2005/06 is 489L (the equivalent of £4,895). This can be higher or lower if you have any additional tax relief claims you can make against your earnings or you have a Benefit in Kind of any sort (e.g. - company car, company medical insurance etc).

[theboyfold]

Eric Mc said:

Are you on a proper tax coding now and, if not, why not?

Cheers for the advice, I've contacted my tax office and they have changed my ttax code to 489L and like you said any overpaid tax will be repayed through my salary this year. I now have to get a P60 with a letter to my local tax office and ask for the overpaid taxes back.

Any idea how long that could take?

Also, just to try and get my head round this, I've been paying the higher rate on everything I earnt since I have been on the higher code? Rather then getting the first £4k or so taz free and the next however much, at the lower rate of tax? But everything I've earnt above the 2 lowest bands has been taxed correctly?

Forgive my ignorance!!

>> Edited by theboyfold on Tuesday 20th December 08:31

[Eric Mc]

You have been paying tax at 22% on all your earnings. By the time you get to the end of the current tax year (5 April 2006). you should have paid Zero Tax on the first £4,895 of your salary, 10% tax on the next £2,090.00 and 22% on everything above that. The actual "Higher" rate of tax is 40% and I am assuming that you have not earned enough to put you into the 40% tax band (Gross earnings per annum of £37,295 or higher will put you into the 40% band).

For the record, the tax bands are as follows:

£4,895 - tax free
Next £2,090 - 10%
£2,091 to £31,400 - 22%
£31,401 onwards - 40%

Your NI should have been calculated correctly as you go - it is not dependent on the tax office issuing you with an official notification of your "allowances". The employer should apply the correct NI bands (which are similar - but not exactly the same as the tax bands)automatically.

[theboyfold]

Thanks for that, it makes much more sense now!