I have recently been put onto a Month 1 Week 1 tax code, and doing some reading I found this:
It means that your tax for the month does not take account of any tax paid in any previous months (since 6 April 2010) and this will continue until the end of the tax year. This could be for a number of reasons; either a reduction in your code number or the fact that there has been a gap in your employment or some details are missing about a previous employment. The effect it has is this. In month 1 of the tax year you are taxed on 1/12th of your annual salary, in month 2 you are taxed on 2/12ths of your annual salary less what you paid in month 1, in month 3 you are taxed on 3/12ths of your annual salary less what you paid in months 1 and 2, and so on. Week/month basis means that this chain is broken. So you pay on each month in isolation. There is no effect on your NI contribution as this is not calculated cumulatively anyway.
Source: Yahoo Answers
Now let's say that I earn £30,000 per year and going by this, then, this would mean that my monthly tax would be: (30000 / 12 = 2500) so I would get taxed on this months salary £2500 but I would only earn £1,957.27 so therefore, I would be in negative. I don't see how this is correct.
Can anyone offer a better explanation to how the Month 1 Week 1 tax code calculates your monthly tax?