UK Tax Advice

drewchad · Post by **drewchad** » Tue Nov 30, 2004 5:00 pm

As way of a thank you to all the help I have received on this board, I would like to offer anyone with UK tax questions to fire their questions at me & I will try & help as best I can. (2 years UK tax experience)

If this is an inappropriate place to post, please let me know.

try-one · Post by **try-one** » Tue Nov 30, 2004 7:35 pm

Great offer, we all should learn about UK taxes and how to comply and manage them...

Alagomeji · Post by **Alagomeji** » Tue Nov 30, 2004 8:10 pm

Hi Drewchad, can you give us a breif rundown of tax for a single person, unmarried, no kids? Also, can we claim tax benefits for dependants who are not resident in the UK (e.g parents et all)

Post by **John** » Wed Dec 01, 2004 8:14 am

Allowances for dependents? Absolutely not ... not even if they were living in the UK.

UK income tax system is simplistic .... no tax reductions for being married (except for some elderly), having children, or for any other dependants.

(Tax Consultant for 39 years : Fellow of Chartered Institute of Taxation)

tvt · Post by **tvt** » Wed Dec 01, 2004 10:09 am

drewchad,

What are your qualifications?

drewchad · Post by **drewchad** » Wed Dec 01, 2004 11:42 am

Tax Basics:
Most individuals work in the UK as employees and have Income Tax and National Insurance deducted at source on a progressive scale as follows:

Income tax:
£0 - £4,745 = 0%
£4,746 - £6,766 = 10%
£6,767 - £36,415 = 22%
above £36,415 is taxed at 40%

On top of Income Tax, National Insurance (Class 1) is deducted as follows:
£0 - £4,745 = 0%
£4,746 - £36,415 = 11%
above £36,415 an additional 1%

So some one earning less than £4,745 would pay no tax and someone earning £45,000 would pay tax of £10,207.60 & NI of £3,542.55, leaving take home pay of £31,250.

(BTW I'm a New Zealand CA)

bird2004 · Post by **bird2004** » Wed Dec 01, 2004 11:49 am

What salary is generally displayed in job adverts from UK? Before or after tax ?
Thank you.

drewchad · Post by **drewchad** » Wed Dec 01, 2004 11:51 am

It will always be before tax.

HSMP · Post by **HSMP** » Wed Dec 01, 2004 12:18 pm

Drew..
Is the tax paid on cumulative basis? Let me provide a scenario:
If i earn 4000 in one monthly and the next month I earn 3000
will the tax be calculated on - 48000/yr income on first month and 36000/yr on second month
or - (4000+3000)/2 = 3500/month and 42000/yr??
If its confusing let me know I will draw a table for clarification.

drewchad · Post by **drewchad** » Wed Dec 01, 2004 12:34 pm

You would be taxed on a cumulative basis and the tax will generally be calculated correctly providing you work a full year and have a National Insurance number (not a temporary one).

However, if you only work part of a tax year you will more than likely be due back a refund, as you get the full tax free allowances regardless of how many days you work in the tax year.

drewchad · Post by **drewchad** » Wed Dec 01, 2004 1:45 pm

I have adjusted the rates above to show the basic rate of income tax at 22% it is only above £36,415 you would pay 40%.

(this may have scared some of you!! - thanks John for pointing out my ommission)

Alagomeji · Post by **Alagomeji** » Wed Dec 01, 2004 1:59 pm

This is very informative. Majority of HSMP holders will probably be hit with the 40% blanket. But doesn't this mean that someone earning say 36,400 will take home more than someone earning 37,000? Please correct me if I'm wrong.
Goodness! No tax reliefs for dependants? That means no kids for me guys!

f2k · Post by **f2k** » Wed Dec 01, 2004 2:08 pm

Can you just clarify the point of say one starts work in January, with the tax year running from april to april. can you confirm that there is a high chance that that person might not pay for that financial year. There was a bit of a disagree before between two guys here on this forum

drewchad · Post by **drewchad** » Wed Dec 01, 2004 2:25 pm

Firstly,
Algomeji, as a progressive system the first £36,415 is taxed at the rates mentioned above it is only income above this rate that is taxed at 40%. Not all of your income is taxed at the highest rate if you earn say, £37,000 only £585 would be taxed at 40%.

f2K, You will normally always have tax & NI deducted unless your weekly income is below £89 or £385 monthly. However, once the tax year is finished you are able to submit a tax rebate claim if you have been overtaxed, this will generally be the case when you first arrive as you will normally not work a full tax year. It is generally only the tax you can get back any overpaid NI will disappear.

Alagomeji · Post by **Alagomeji** » Wed Dec 01, 2004 2:52 pm

so this means that less than £36,415 pays 33% tax!!! Gosh.

hk_007 · Post by **hk_007** » Wed Dec 01, 2004 3:32 pm

Alagomeji wrote:so this means that less than £36,415 pays 33% tax!!! Gosh.

Relax...it works to approx 18.46% only

....only':roll:'

drewchad · Post by **drewchad** » Wed Dec 01, 2004 3:51 pm

Don't forget to add National Insurance into your calculations, so effective tax rate would be more like 29%.

hk_007 · Post by **hk_007** » Wed Dec 01, 2004 4:07 pm

You tax guys always want more money don't you ?':D'

pdd123 · Post by **pdd123** » Wed Dec 01, 2004 7:52 pm

Guys..
I found this on the web..seems pretty accurate too..
Hope it helps..

http://www.listentotaxman.com/

regards
pdd123

goodnews · Post by **goodnews** » Wed Dec 01, 2004 8:16 pm

Hi Drewchad

I have this pecuilar situation, if you can explain to me how it works.

Lets say Mr. X earns 550 a day

Part 1
He works first time in UK in Month no. 3 for 20 days * 550 = 11k

Since he works under umbrella company and pays the Emply NI thru his own earning,
therefore What should be the deduction of Emplyr NI ?

Emplyr NI ???.
A Service Charge of 15 GBP is deducted and further
Holiday pay 10% of monthly earning is deducted which is (1100).

How much should be the Tax & NI calculated after all the above deductions.
Tax ... ???
NI.. ???

Net Pay..???

Part 2.
Works for 18 days in month No 4, hence 18 * 550 = 9900

The same above deduction (Emplyr NI, Service Charge, Holiday pay) apply as stated above.
Pls can u explain the tax & NI Payment here.
Tax ..??
Ni....??

Net Pay..???

Part 3 is
Payment of Holiday pay in month no 5 amount 2090 without any deductions
Pls can u explain the tax & NI Payment here.
Tax ..??
NI....??

Net Pay..???

As Mr X leaves the job in Month 5 and gets a P45.
what will the P45 show, how much earned and how much tax paid.

All the above was computed with TAX code 474L.

I will appreciate if you could answer the equation above please.

Thanks & regards

goodnews · Post by **goodnews** » Wed Dec 01, 2004 8:20 pm

Sorry Drewchad

One correction the service charge is 15 GBP per week. instead of 15 per month.

drewchad · Post by **drewchad** » Thu Dec 02, 2004 12:46 pm

Goodnews,
Using an umbrella scheme you will be payed both salary and dividends. It is impossible to work out what tax is due from your information, it would be easier for you to ask them. They should be giving you pay slips which will most likely show the salary, deductions and dividends paid. Depending on how much they have declared as dividends, you may have additional high rate tax to pay at the level you are earning. I would definitely ask them the personal tax implications of their structure, which are normally not explained fully.

goodnews · Post by **goodnews** » Thu Dec 02, 2004 3:36 pm

Hi Drewchad

Actually with the umbrella company there was no such arrangements as dividend, it was just salary and payment of Emplyr NI and others as mentioned in the query.

The service ended with the umbrella company in month 5, that's it, no more service after that.

So can you please explain just taking into consideration the information i have provided.

that will be very helpful pls.
Regards

drewchad · Post by **drewchad** » Thu Dec 02, 2004 3:53 pm

By law the Umbrella company needs to provide you with a P45 when you stop working for them. Ask them for this & if they are not willing to give you this ask for a Statement of Earnings.

Either of these will show how much you earned, as well as any tax & National Insurance you have paid.

MWazir · Post by **MWazir** » Thu Dec 02, 2004 4:10 pm

drewchad,

I worked a little more than 6 months of the financial year 2002-2003 During this period about 4 of them where under a temporary NI number after which I was allotted my permanent NI number. I did not claim any tax allowances for this period.

Is it worth checking with inland revenue if I am eligible for any tax allowances for that period? Or is it too late for me?

Many thanks

Immigrationboards.com: Immigration, work visa and work permit discussion board

UK Tax Advice

UK Tax Advice

Allowances for what?

what salary ?

UK tax calculator