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I started working on 21 March 2016 in my first job in the UK.

How much tax should I have paid?

It seems my company combined my salary with my April salary and deducted a lot of tax.

Monthly salary is 3750.

Thanks

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Firstly UK tax years run from the 6th Apr to the 5th Apr the next year. This along with the date you started working, and the day of your first salary payment means the issue is unlikely to be an emergency tax code.

By combining your March 1/3 salary with your April salary your employ has coursed you to pay more tax then if they had paid your March salary before the 6th of April. You only get the tax free allowance for the year the salary is paid in, not the year it is earned in. (Your HR department will claim that the ease of their admin is more important then you paying minimal tax.)

You will also have been over taxed on the combined amount, as it is assume you will earn 12 times your April salary in the complete year – this will automatically be sorted on your next pay split.

(It is pretended in the UK that NI is not a tax! The NI allowance is on a per month bases, so other earnings in a year does not affect the NI you pay.)

If you had started work at another time of year:(e.g. everyone else reading this answer!)

A “month 1” code, is shown beginning with a M and is used when the employer has not been given the correct tax code to use by the HMRC. It gives with 1/12 of your tax free allowance every month. However you may have a full year’s allowance to use against that 1 months income.

Normally this would automatic be corrected when your employer got your correct tax code, but if the last month you work in the UK in a tax year used a “M1” code it will not be. Therefore see https://www.gov.uk/claim-tax-refund/too-much-tax-taken-from-your-pay

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Assuming that your tax code is correct, the tax you are paying will break down as follows:

£3,750 monthly extrapolates as £45,000 annually. Assuming a tax code of 1100L.

                            Annual      Monthly     % of salary
Income Tax (PAYE)           £7,200      £600        16%
National Insurance (N.I)    £4,233      £352        9%
Total taxes                 £11,433     £952        25%
NET INCOME                  £33,566     £2,797      75%

I'm not an accountant, I got my answers from PAYE/NIC Calculator

Seeing as this is your first month and first job, you may not have an National Insurance number yet which means you will be paying emergency tax (1/12 of current tax year personal allowance). Don't worry - this should be accounted for by your company and HMRC in the future and you should pay slightly less tax for the rest of this year while that code is in place.

However, get on that NI number application ASAP otherwise you'll continue on that emergency tax rate!

  • Whoops! Correct - flat 20%. – toadflakz Apr 27 '16 at 8:48
  • Also being the start of the start year, it is very unlikely a M1 tax code has been used. (And it has nothing to do with NI numbers at all! Just if the employer has been given the correct tax code by HMRC in time.) – Ian Apr 27 '16 at 8:50
  • Its not a straight 20% rate, it is just 1/12 of the tax free allowance is used, as they don't know how much of the allowance has been used in other employment in the year. Tax rates etc are otherwise worked out in the normal way. – Ian Apr 27 '16 at 8:52
  • A UK national receives their NI number on their 16th birthday, not when they start their first job. I have no idea on non-UK nationals. – AndyT Jul 6 '16 at 15:23

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