Tax Query

[disney332]

Logic suggests that you will pay more tax in bonus month and in the next month, less tax as you get an effective refund. Then in month 3 your tax will increase and stay the same for the next 9 months if your salary and tax code remain identical.

Thats how paye works. In bonus month you are taxed according to an annual salary of x12 of that figure, which of course is wrong.

Do you get it?

Disney332

[bighal]

If you were paid more and paid the wrong tax, HMRC would have taken the difference in the next month on top of that months normal tax. You will probably find that going forward you will pay more tax but it won't be £100 more each month though.

[Guest]

Originally Posted by Gill635

So, in April we receive a pay rise and a bonus. Apparently the month after (so May) I paid less tax than I should have due to the extra paid in April.

From now onwards, the amount of deductions will be the same as this month every month as it’s now been corrected.

Does any of this sound right? I certainly didn’t get enough of a pay rise to lose an extra £100 odd per month. And why would May have been a month were I paid less tax?

I’m so confused.

Still no reply from my actual employer

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Yes it sounds correct and I think we would have gotten to the bottom of it quicker had you mentioned the bonus and the different tax amounts deducted, whereas you said they were always the same.

When you got a bonus, it was taxed as if you would be on that amount every month going forward. So if you were to get that same bonus every month, I presume it would have put you into a higher tax bracket. This meant that you paid some higher rate tax in April, which was then refunded in May and now in June it has settled down.

[disney332]

Originally Posted by Claudette

Yes it sounds correct and I think we would have gotten to the bottom of it quicker had you mentioned the bonus and the different tax amounts deducted, whereas you said they were always the same.

When you got a bonus, it was taxed as if you would be on that amount every month going forward. So if you were to get that same bonus every month, I presume it would have put you into a higher tax bracket. This meant that you paid some higher rate tax in April, which was then refunded in May and now in June it has settled down.

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Worst bonus month is March... thats a tax reclaim

Disney332

[anneeb]

Originally Posted by Gill635

So, in April we receive a pay rise and a bonus. Apparently the month after (so May) I paid less tax than I should have due to the extra paid in April.

From now onwards, the amount of deductions will be the same as this month every month as it’s now been corrected.

Does any of this sound right? I certainly didn’t get enough of a pay rise to lose an extra £100 odd per month. And why would May have been a month were I paid less tax?

I’m so confused.

Still no reply from my actual employer

See more...

Have you checked on the gov website? It’s worth doing as it will show you exactly how they have reached that figure. I checked last month as my tax code for my teachers pension changed, I shouldn’t pay any tax, they had me as earning about 1000% more on my private pension. I just adjusted on the website to what I will earn and all sorted.

[amf]

Originally Posted by disney332

Worst bonus month is March... thats a tax reclaim

Disney332

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Nope... Best bonus month is March. If on the correct cumulative code you will have paid the right amount of tax. No claim needed.

Problem OP faced has been accurately described by some. Gross pay in month 1 was abnormally high and higher rate tax paid. When only basic salary received in month 2 - may - OP would have reduced extent of HR liability or come out of HR, depending on the actual gross pay figures. This would have resulted in reduction in tax paid in month 2 because of the inflated HR tax paid in month 1. This is how our cumulative tax system works.

Now if OP had been on a non cumulative tax code... Let's not go there😁