Why does my tax fluctuate?

[Gucci]

I've been with my company for 5 months now and I haven't had a consistent wage slip yet! My income level is consistent (although I was given a rise after 3 months, so of course that increased). But, the tax code is the same, and yet my tax deductions have increased....as in £300 difference!

Whyyyyyy?

 

[Marque]

If you were, say, out of work earlier in this tax year then you might have some unused personal allowance. This gets used up gradually, so the effect can be to lower your tax at the start of your employment. The same sort of thing can happen when someone becomes a higher-rate taxpayer during the tax year.

It should all get sorted out by 5 April if your tax code is correct. Ask your employer to explain it, just in case they are making an error.

 

[Beetnik]

Presumably the salary you are now earning is higher than in your previous job.

PAYE is recalcualted every month to estimate your year end earnings.

So say:

April to July - earn £1000 per month - PAYE estimates you will earn £12,000 in year and works out tax accordingly.

August - earn £2,000 = £6,000 year to date in 5 months. PAYE estimates £6000/5 x 12 = £14,400 for year and works out tax.

September - earn £2,000 = £8,000 year to date in 6 months. PAYE estimates £8,000/6 x 12 = £16,000 for year and works out tax.

At the end of the year you would have earned 4 x £1,000 and 8 x £2,000 = £20,000. PAYE only gets there gradually so you pay increasing amounts of tax each month.

QED.

 

[lil.smartie]

Tax codes did change in Sept which affected amounts then.

Kate

 

[Gucci]

This is making sense. My earnings have changed quite a bit over the year

Jan 08 - July -08 = £old salary amount from previous company (on upper tax rate)

July 08 - company bust - no July salary

Aug 08 - new job = £7,000 increase over old job
Dec 08 - pay rise = £13,000 over old job

SO my PAYE is as confused as me!

 

[Benzowner]

Check you tax code, your new employer may still have you on basic rate, a BR tax code because they have not had confirmation from the tax office of your correct sode. Normally, your tax code should end with L.

 

[Uberwagon]

Wait till your wages fluctuate in large amounts.

PAYE can be a pain at times, my tax amounts have ranged from 5 to 45% tax.

Wait till the tax year is over and then work out the average, it should be correct for your tax band. I've worried about mine for the past 3 years but every new tax year it works out that I paid correctly.

Dave!

 

[Frank O' Phile]

Remember how concerned you were back when the old company went bust?

Glad things are going well for you.