Tax changes

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Employee query and i cannot work out why, any help would be apricated 

April - May tax paid £507 Ni £203.24, then in June tax has changed £386.306 NI still £203.24, Aug. tax £480.54 ni still £203.24 no change of tax code, salary has remained the same each month 

  • 0
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    Hello Janet

    To be certain we would need to know a bit more including the gross pay each period and the tax codes used for each pay period (including if they were W1/M1 codes).

    However in my experience it is not uncommon for a tax code change to affect 2 pay periods while the tax position balances out.  At a guess I would say their personal tax free allowance has increased so in June when the new code was applied there was a bit less tax to pay as at that point in the year they had already paid slightly over what was needed based on the new code so a small adjustment down for them in June.  August tax is likely to be their new normal.

  • 0 in reply to Catherine W

    Hi Catherine

    The gross for  April was £3,588.50 tax ode was 1263L monthly pay

    The gross for  May was £3,588.50 tax code was 1263L monthly pay

    The gross for  June was £6,146.55 tax code was 1263L monthly pay to include a bonus of £2,580.00 tax paid this month £1166.20

    The gross for July was £3,588.50 tax code was 1263L monthly pay

    The gross for Aug was £3,588.50 tax code was 1263L monthly pay

  • 0 in reply to Janet Dormer
    verified answer

    Aah! That makes more sense - you missed out the bonus payment (key info there) and I misread that the tax code changed in June.

    It will be due to tax thresholds - the bonus would have kicked them into the 40% threshold in June.  

    The tax due on each month's pay is determined after taking into account any tax you've already paid in the year and how much of your accumulated tax-free personal allowance has been used.  So each month, you get more of your allowance and the whole tax position is recalculated again. 

    Because they paid so much more tax in June but aren't still receiving a higher taxable gross pay, the tax position is balancing out in July and August to ensure they don't pay more tax than required over the full year.  September's pay (assuming just the basic £3588.50 will have reverted to the normal tax of £507.

  • +1 in reply to Catherine W
    verified answer

    Yes that makes much more sense now, thank you Catherine, as soon as i put in the June figures i did think "i bet that's what it is" but through it was best to check, as he was not querying the June payment.  Tank you so much for your help