I hoping to get some informations on how the tax system works in UK. Basically, this is my first job here, I haven't worked before April. I have a basic gross salary of £41,600 and I pay 4% as a pension contribution.

Now, my question is: some websites say that my salary will be tax free until I reach the £12,600 allowance. I am not sure how true is it, but if so, how much will I receive on my first month? The pay scheme is PAYE.

In other words, how will the breakdown of my pay look until I reach the tax free allowance limit?

  • This might help: thesalarycalculator.co.uk/salary.php
    – RonJohn
    Jul 7 '19 at 15:16
  • Thank you RonJohn, but that doesn't answer my question
    – Paul Mer
    Jul 7 '19 at 15:20
  • 1
    Why not? It's a Take Home Tax Calculator...
    – RonJohn
    Jul 7 '19 at 15:26
  • Yeah, but the thing is that it doesn't offere a breakdown. As I was saying, how the tax free allowance is reflected in the salary amount is what I am looking for.
    – Paul Mer
    Jul 7 '19 at 15:35
  • 2
    @RonJohn: you need to check when the UK tax year is and how PAYE works to be able to answer this question helpfully :-) Jul 7 '19 at 15:48

The operation of PAYE means that the tax-free allowance is allocated monthly, but in the end tax is calculated on an annual basis.

If you haven't worked since the start of the UK tax year in April and your employer is aware of that, which they should be via the "new starter" checklist, then you should get the entire tax-free allowance for the year to date in your first payslip. You would then get the rest of it in monthly chunks through out the rest of the year.

So if your first payslip comes at the end of July, then you'll get 4 months' worth of allowance, i.e. £4,166 (1/3rd of the current annual allowance of £12,500). As your salary for the month would be less than that, you won't pay any tax this month. Next month, August, you'll pay a bit less tax than usual as there'll still be some excess allowance left. In September and onwards your take-home pay should stabilise to the standard rate.

National Insurance is always charged by pay period so you will be charged the standard amount immediately. Likewise your pension contributions will immediately start out at the standard rate. So in the first month you'll receive your gross pay, minus NI and pension. (Assuming there aren't any other deductions, but I can't think of anything likely.)


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