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Where Taxpayers and Advisers Meet

weekly paid income tax

barnaby666
Posts:1
Joined:Fri Jul 15, 2022 7:12 pm
weekly paid income tax

Postby barnaby666 » Fri Jul 15, 2022 7:19 pm

Good Evening
Iv just recently started work this month on what's basically minimum wage. since last tax year I have been unemployed so I'm only starting work from August this year. by the end of this tax year I will have earnt less then the 12570 tax requirement. My question is would weekly tax still be deducted from my salary or would each weekly pay be tax free until I reach over the 12570? my tax code is 1257L. currently the agency who pays me are deducting for NI but not income tax so im assuming id be tax free on all earnings under 1257? does this sound correct? any help much appreciated.

darthblingbling
Posts:698
Joined:Wed Aug 02, 2017 9:09 pm

Re: weekly paid income tax

Postby darthblingbling » Sat Jul 16, 2022 7:25 am

Sounds right

Lambs
Posts:1611
Joined:Wed Aug 06, 2008 3:15 pm

Re: weekly paid income tax

Postby Lambs » Sat Jul 16, 2022 7:44 am

B,

Depends on whether your PAYE tax code is operated on a "Cumulative Basis" - the standard treatment - or on a "Week 1/ Month 1 Basis".

In the former case, you will have all of the Free Pay (1257 x 10) that has accumulated pro rata for the first 5 months of this tax year - presumably more than sufficient to offset income received to date, etc., as the year progresses.

In the latter case, you are allowed a week's worth of your Tax Code (1257 x 10)/52 against each week's salary, without considering any pay or allowances that have accumulated in prior pay periods up to that point.

So it is conceivable that, if you are being taxed on a "Week 1 / Month 1 Basis", then you will end up paying tax unnecessarily.

Your employer generally has no choice as to what approach to adopt: PAYE codes are determined by the rules subject to any specific instruction from HMRC. You can check with your employer and if they say "it's on a non-cumulative or Week 1 Basis" then you can contact HMRC to ask if it can be put on a cumulative basis -

Income Tax Helpline 0300 200 3300

If you flip from a Week 1 / Month 1 Basis to the Cumulative Basis part-way through the tax year, then you should get any tax overpaid to date (for that tax year only) as soon as the Cumulative Basis is applied to your weekly pay.

Please do note that even if you are on a Week 1 / Month 1 (non-cumulative) basis right up to the end of the tax year, your actual taxable income and overall tax liability should be evaluated over the entire tax year, pretty much like everyone else: HMRC generally undertakes a calculation for PAYE employees a few months after the tax year, once all PAYE returns for the tax year should have been received and processed, and if it turns out that you have overpaid tax because you've been paying on a non-cumulative basis then you should get a refund. Not ideal from a cashflow basis but you should end up with the benefit of all of your tax-free Personal Allowance in that annual calculation.

However, please also note that certain State Benefits, such as you may have received April 2022 - July 2022, are taxable, so will use up some of your tax-free Personal Allowance. See for example -

https://www.gov.uk/income-tax/taxfree-and-taxable-state-benefits

So you MAY have accumulated a bit of taxable income so far this year already.

Hope this helps.

Regards,

Lambs


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