Income tax

[TuxRacer]

If someone's on a salary that falls into the basic rate tax band, they only have the one job and they pay tax by PAYE with something like this on their payslip:

A payslip said:

Tax Code : BR

Tax year to date
Taxable pay : x beans
Income Tax : x/5 beans

Am I right in thinking they're not being afforded their personal tax free allowance? (i.e. the basic rate of 20% is being applied across the full amount).

And if I am right, there wouldn't be a good reason for it would there?

Thanks!

[Eric Mc]

Yes BR (Basic Rate) means that the employee is not getting any Personal Tax Allowance (curently £6,475 per annum) allocated against their salary.

There are a number of reasons why an employer might be using a BR code rather than a "proper" code (usually 647L).

i) the employee has another PAYE source of income - e.g another job or a pension of some sort. That other job or pension might be already making use of the 647L Code and therefore any additional source of PAYE income will receive the BR code.

ii) the employee was not able to furnish his new employer with a P45 from his previous job. If this is the case, the new employer often will, by default, apply a BR code.
If the new employee doesn't have a P45 from a previoous employer, what he needs to do is complete a Form P46 which states that his new job is his only or main employment. This form is handed to the employer who then notifies HMRC who will then, in theory, issue a corrected tax coding for the employee. Until the new coding is issued, the employer should really continue to operate BR.

[TuxRacer]

Thanks Eric.