Emergency tax

[skyblue2027]

Hello, i started work on 1/3/17 and my new employer records are not updated with HMRC as yet so i have been advised i will be paying emergency tax.

 

what percentage will that be on a gross payment of £1500? the person on the chat said depends on the code. 20% or 40%

[BazzaS]

Emergency tax is at Basic rate, and can be with with no personal allowance.

So it is often shown by code 0BR on the payslip, or 0T

This is usually used when you have no P45, and have said that that this job is not your only or main job.

 

This means you overpay (but not by much! and only until it all gets sorted out by going on to the correct code) if you are a basic rate payer with outstanding allowance, but if a higher rate taxpayer you underpay tax until it gets sorted out.

 

Back when P46(T) forms were used it wasn't uncommon for people to be on 0BR if they hadn't handed in their previous P45 showing their previous employment's PAYE details ; at least, until they got their payslip, complained about the 0BR code & being overtaxed, and got advised to complete a P46(T)!

 

With the move to the "New Starter Checklist"

https://www.gov.uk/government/publications/paye-starter-checklist they have done away with P46(T)'s and it should all be done through HMRC's real-time information system.

 

If your employer has notified HMRC this is your only or main job, your "emergency tax code" should be 1100LX (sometimes shown as 1100L W1 or 1100L M1)

This means you get the proportion of your personal allowance (£11,000 per year) allowed for that month or week, but as if it were the first week of the tax year, as they don't know how much of that year's allowance you have used up.

If you haven't used up your proportion of personal allowance that would otherwise be available to you : you won't get to use it yet (on 1100LX) but you will get to use this month's worth (so paying £183 less tax than 0BR for an annual salary of 11k or more)

 

Here is why / how they do this.

 

So, Person A and Person B both are allowed £11,000 personal allowance per year.

In the first month of the year they could take £916.67 free of income tax.

If (instead) Person A worked every month of the year for their (just under) £916.67, but Person B didn't work, and we got to the last month of the year :

Person A has £916.67 of their personal allowance left

Person B should have all of their personal allowance left.

 

If Person B can say "this is my first job / income since the start of the tax year" they should be able to put on 1100L code : they get all of their £11,000 allowance available.

 

If Person B can say "this is my only or main job" then they should get some allowance. However, the system can't tell if they are entitled to the whole £11k or (like Person A) just that month's allowance (because it doesn't have the details of that year's previous PAYE to decide) : so they just get that month's Allowance - the same amount as the first month (or week's- depending if paid weekly or monthly) of the year hence 1100LX / 1100L M1 / 1100L W1 : the "week 1 / month 1" basis

 

If the employee has said it isn't their only or main job : they should be getting their allowance on their main job, and only get it once. So, there is no allowance for this job (hence 0T)

[skyblue2027]

thats is an excellent explanation thank you!

 

i thought on £1500 they would only take a maximum of £300 in tax (20%). the webchat advisor did not make it clear and said it could be one of the other codes (40%).

[honeybee13]

Did the website advisor ask what your total monthly income is? If not they were giving you generic information.

 

HB

[BazzaS]

0BR is at basic rate.

 

0T could have a 40% (or 45%!) rate kick in, BUT only if you were earning over £32k/£150k that month!!

 

So, how much does the webchat advisor think you'll earn ?!

 

1100LX would have 40% (or 45%) kick in, but at 32k/12 and 150k/12 ( it is as if it is the first month of the tax year..... month 1 basis)

[skyblue2027]

i told the agent 18k gross a year or 1500 a month but they said there were 3 codes.

 

i said surely i wont pay 40% on my salary! agent said have to wait and see what code your employer uses as my record is not updated as yet. they have 35 days

[honeybee13]

They don't know very much then. If you have no other earnings, you'll pay 20% tax.

 

HB

[skyblue2027]

they did worry me i must admit!

 

thanks for the info and replies.

[honeybee13]

By the way, why are you talking to a web advisor? Your payroll people should be able to help you.

 

HB

[skyblue2027]

my employer outsources their payroll so i am awaiting a payslip so i thought i would contact the web chat for HMRC in advance.

[BazzaS]

For 1500 per month, unless your tax situation is very complicated you'll pay (for tax, not considering NI):

 

According to your previous PAYE year to date if they get a P45 or the details through and then you are on 1100L giving you your year's allowance, but no more than £116.87 (see below for where 116.87 comes from)

 

For "only or main job" : 1100LX

(1500 - 916.66) x 20% = 584.34 / 5 = £116.87

 

For "not only job and not main job" : 0BR or 0T

1500 x 20% : 300.

 

And as an internal "idiot check" : the difference between 300 and 116.86 is £183-odd ...... the £183 difference I mentioned between 0BR and 1100LX in paragraph 5 of post #2.

 

Why the webchat advisor thought you might pay 40% on those details : you don't have a private pension of 14k per year or anything??

[skyblue2027]

excellent. many thanks for your info, much appreciated.