Do you understand how PAYE works?

However, this sort of thing isn’t taught and so I can understand why so many people have no grasp of it.
The kind of things are what should be taught in school. how to manage bills, taxes… all should be covered.
I think it is a case of 'when the pupil is ready, the teacher will appear'; lots of schoolchildren see no relevance and have no interest. I know that many don't like Maths and say "what's the point in Pythagoras?" but even why you try to apply Maths (e.g. explain PAYE) they are still not interested.

Some people understand only when it suits them. I've known plenty of people who can't be bothered to add or multiply correctly when it comes to the employer's business (stocktaking, doubling quantities, etc) but are suddenly on the ball when it comes to their payslip.

Yes, exactly this! You see it all the time for everything. Local Facebook posts, are the trains off, what time is the bus to wherever, how many stone is 100kg. Fick sake if you managed to type the question into Facebook then you would have been better off typing it into Google and getting accurate answers

We are taught mathematics and given logical problems to solve within those types of class.

We can surely use the internet to search for either a tax calculator or research how it would work if we get a personal allowance of £12,500 up to £100k and then pay 20% on the first part and 40% over x amount.

Why do so many people expect to be spoon feed at school? Should we be teaching independent research and how to find an answer to a query at school using basic materials and sources? Should we be teaching critical thinking and curiosity?

It’s where you get robbed horribly for working your arse off

I've just done that on a basic tax calculator online and you take home c£900pm more on the higher salary. That's on a standard tax code, not taking into account any pension.

Also, the post you're replying to is correct, people do think that once they go into the 40% tax band everything is taxed at 40%, people also think they get taxed higher on second jobs (because they don't have the allowance twice I guess).

Sorry, I just typed exactly what Opi just said!

Tbf the PAYE 'calculator' is a tad basic these days with its predictions. There should be a box to tick:
Yes this is a salary increase from now on, employee now earns £4k not £3.5k, from here on with. Adjust tax code.
No! this is a 1 off bonus of £1000, don't tax the poor beggar to death please! And make him wait till tax y/e or worse still afterwards to recalculate.

I do understand how it works.
But that doesn't stop it from being stupid when a £1000 bonus to an employee who earns £45k is taxed at 40% as if they had received a £1000 per month pay rise, and they end up having to wait to the end of the tax year and go through an unnecessary rigmarole to reclaim overpaid tax to recieve £200 of their bonus. That's a fault of paye softwares. It should be possible to tick a box that says yes obviously this employee has recieved more than 1/12th of the threshold between basic and higher rate tax for this month, but across the tax year they will stay under the threshold so calculate at basic tax rate only. It's unreasonable to make paye employees deal with the admin in these cases.

Thus sort of thing IS taught as part of pshe curriculum

It isn’t that that causes the problem. It was the withdrawal of everything else which caused marginal rates of almost 70-90%. This is now at 100k and you can have marginal rates of 100%+. In essence, you can take home less on 125k in comparison to 99k.

Employers send a submission to HMRC every pay day. The idea was that HMRC could keep themselves and paye codes up to date on a “live” basis. Of course despite forcing that onus onto employers, HMRC don’t uphold their end and don’t actually bother to review their weekly/monthly data in most cases.

Employees should therefore keep HMRC updated directly via their online personal tax account, which is actually a pretty good way to stop problems arising with things like new benefits, going over £100k etc., multiple concurrent jobs etc

Yes I understand how PAYE works and would realise if I am a HR taxpayer a £1000 bonus will only be £600 after tax.

To be fair it's not 'Pay as you earn' it's 'Pay what HMRC think you going to earn this tax year'. So if your pay changes during the tax year HMRC will incorrectly tax you. I assumed that employers actively told HMRC if my salary changed but they don't, which caused a major screw up.

It's the people who say they don't want a pay rise that takes their salary above the 40% tax threshold because they think they'll be worse off as they think they'll get taxed 40% on their ENTIRE salary that astonish me.

I'm not sure how we'll ever get around this op. As pp said would reaching it in schools actually help?

I love a good fight with HMRC. Plus, I've had many of them tell me incorrect things which I've challenged.

Oh, childhood memory - I remember thinking why on earth are people making a big deal about an extra penny on income tax. Thinking it was literally one penny per person per year.

I've understood how tax works since I was about 10 and heard my dad moaning about the basic rate being 8s 6d in the pound. I couldn't work out how they'd calculate that on amounts of less than £1, so he showed me how to convert the shillings and pence into a percentage. That came in handy when the currency was decimalised a few years later!

I agree that stuff like this should be taught though. Not everyone has a dad like mine who worked with money and complex calculations, and not everyone is geeky enough to ask even if they have.

I had a colleague whose net pay was a lot less than it should have been. It came out in conversation and I advised her to check her tax code. She thought a tax code was just a reference, like an NI number, and didn't realise it affected your net pay. She hadn't been issued a new code when she gave up a second job, so she was getting less than half the personal allowance and got a big refund when it was sorted out.

Do you honestly spend your life not knowing anything until someone tells you?

You read. You research. You ask questions. You study.

No-one has ever sat me down to go through the subject of marginal tax rates with me. Yet somehow I understand.

I just can’t understand why they prioritise teaching us stuff like Pythagoras, ionic binding and the pluperfect tense, which most of us will never use again, instead of teaching us tax. Specifically income tax, NICs and PAYE.

It feels as if the powers that be don’t want us to know how to calculate it, so we don’t dispute it if too much has been taken…

Same with pensions - would you know if your employer has calculated their contribution incorrectly and gives your pot too little?

Daftest query I had when I was running a payroll - guy that worked part time £100k+ for two days a week as a business consultant, so you'd assume reasonably intelligent.
Came to see me after he'd been there about two years, with a query kicked off by pension autoenrollment. "My letter from HR says my salary is £108k, but my payslip says £9k" - Me, "yes, you are paid every month, so you have to divide the £108 by 12" - "oh, I see"

I've had some fairly twattish questions about PAYE as well.

@Comefromaway - that would make sense actually, thank you!

People forget about the personal allowance and the 20% bit being used up already.

I think a lot of people would genuinely appreciate it if salary info was published as two things:
The gross pay
The amount you'd actually receive after tax, routine pension deductions, assuming its your only job & you don't have other income etc. This is the case for most people.

A lot of my friends don’t. I’m a mathsy finance person so I get it but one of my friends does not. She’s always sending me her payslips thinking she’s been over taxes etc. and I reconcile it for her exactly in a spreadsheet and send it over to her saying I think it’s fine. She also got excited because her work pay her bonuses if she hits certain targets and she thought this was great because “bonuses aren’t taxed…” I had to put her right on this.

I am on maternity leave atm and one of my husband and I need to go back four days a week for childcare reasons. Recently did the calculations, I’m a 40% tax payer and him a 20% tax payer and we’re actually better off if I go part time because of the way tax works.

Well, that used to be the rule actually. In the 80's, Thatcher introduced a rule that performance related bonuses were tax free. The aim I think was to encourage entrepreneurship and reward businesses for doing well.

The actual upshot was that suddenly noone had an actual wage any more (no min wage in those days), they were just paid "performance bonuses". Where I worked we did have a wage, but our annual bonus was renamed and we got that tax free. That went on for a few years.

So, tax free bonuses were a thing within living memory.