Do you understand how PAYE works?

Yes - but I'm a management accountant so it would be worrying if I didn't! It doesn't surprise me that many others don't, and even I have no idea what on earth HMRC did to my tax code last year 😱

We do a sort of work and life skills training programme for our interns & they loved the financial literacy one which included tax codes - there was a massive range of knowledge beforehand.

Many years ago when I worked on the phone lines for HMRC I was taught at great length how to manually calculate any kind of PAYE scenario. It’s awful that the staff aren’t trained so well these days.

I had to sit down with a pen and paper to show my husband why his tax had gone up when he got his bonus and then down again the next month and then up again a bit the month after. He’s a well educated man but he had no idea how it worked.

I thought I understood it but had no idea that my tax code was wrong when I went over £100k for the first time last year. I knew I’d lose my personal allowance, I just didn’t realise it wouldn’t automatically be lost. I was overpaid all year and now am repaying it, so double whammy this year of paying 60% effective rate tax plus repaying last year’s overpay.

There's a vague mention in the maths curriculum of applications to financial matters, but without a more defined set of things to be taught, it's not very likely to be done well. There are probably plenty of teachers whose knowledge is hazy.
The other problem is that kids are not interested enough to retain what they are taught, particularly if it is done too early. Maybe it should be compulsory at post-16 level, now that they're all still in some form of education.

I was particularly unimpressed by DD's work on financial matters in year 9 maths - admittedly it was during lockdown, but it was entirely "ask your parents to tell you about...", which misses the whole point of covering something in school. I imagine that some will have learned all about savings, pensions, mortgages and tax rates, some will have learned about benefits, and many will have learned nothing.

I think part of the problem is that people think bonus = gift and therefore have issues with it being taxed.

I've had to explain tax thresholds to more than one employee- there's definitely a lack of understanding of the stepped approach to tax - people think that 40% tax means 40% on every penny they earn, which is why people mistakenly* think they will be worse off if they get a pay raise.

*I say mistakenly because there are a few cases where other factors like child care payments etc. come into it.

I understand it but lots of people don't -- HMRC are the worst culprits! I have two jobs and I also file a self-assessment tax return. Every single year when I file my self-assessment, HMRC inexplicably decides that my full annual income for job 1 (my main job) is actually just however much I've earned in the year to date. God knows why. I've put the correct number on my self-assessment and they never mix up the other one.

Is it because the fee is taken from your salary pre tax rather than post tax?

I went to a pretty mediocre school but we had an excellent series of lessons on tax, national insurance, pensions and bank accounts (interest, charges etc) most left to start work at 16 so it was no surprise how much/little was left

I knew the basics but having to do a tax return this year for the first time has actually been really helpful - seeing the calculation breakdown of various elements.

Still makes me cry with the amount I have to pay...

One thing I - embarrassingly - don't understand still though, if anyone would care to enlighten me, is why the amount I pay for my DH and DC to be included on my PMI is taxable. I know it's classed as a benefit in kind, but why do I pay tax if I've already paid the fee for it? (Covers eyes in shame that I can't wrap my head around this...)

I understand it now, but the first time I got a bonus I didn't realised I would get taxed. I was probably in the 40% tax band too...

thinking about the education aspect I can remember a LOT of years ago when I was at Technical College doing an 'O' level in Personal Finance. It was excellent, covered mortgages, pensions, tax compound interest etc.

I can't see the suggestion of teaching it in schools would ever work . Learning about PAYE (which is really only half the story) would be utterly boring and irrelevant to a 15 year old considering grown ups who earn a salary can't even be bothered to understand it most of the time.

I am the accountant for a small company (4 of us on the payroll, plus 2 self-employed consultants who invoice me monthly and the owner who is paid via his loan account). At the beginning of 2023 we completed a massive project and in April 2023 we were all paid a £5k bonus. The three of us on the payroll with non BR tax codes (one is over retirement age and their tax allowance goes to their pension) were hammered in April so we saw little of the bonus but we then paid very little tax for several months as our tax allowances evened out. Being part of a small team means that I can speak to my colleagues to warn them of the consequences of tax code changes and bonus implications.

Yes. Both my parents were accountants and made sure I knew.

I have had to explain tax countless times - including to my manager who wanted me to fill out the wrong form and once even more memorably - to my companies payroll who had made an error which resulted in my pay and tax being messed up.

They wouldn’t have it that they were wrong - I think I had to call HMRC in the end.

Well I sort of understand and can work out what I'm supposed to pay etc.
Maybe you could teach my ex employer because they didn't work it out right in 2020/21 and I underpaid on taxable benefits. Then in 22/23/24 I paid that via my tax code and could've cried with what little I was left with and with col it was hard.

I got a letter last month telling me this was their error I'll be issued a new PD11 and they will pay the under tax. How much I don't know. No one will tell me and my account on hmrc now has no tax codes available for those years. So I do know yes but others who in the job clearly don't!

Would agree with this!

I work in tax and have to call Hmrc often - and it's very depressing when you have to explain to them how it works - as that's just basic.

It used to be that Hmrc training was the gold standard not these days though

I understand how it works, but I'm salaried and usually I get paid the same amount every month.

Dp works shifts and they have all different shift allowances, hourly rates, unsocial hours payments, first aider payment, weekend time and a half, bank holiday double time etc. and it's almost impossible to decipher his payslip. We mostly manage to work it out in the end, but there are a lot of people he works with who don't understand their pay and wouldn't know if it was wrong.

Yes I do, but I run a business and the payroll every month myself. I worked in payroll previously for years and I'd often get similar questions so clearly some people don't understand the ins and outs of it all. That's fine...I'd just explain. If you don't know, you don't know.

I understand how PAYE works and how to check my tax code as frankly my work screw it up at least once every 6 months so check my payslips with a fine toothcomb!

Their best one was when they overpaid me I pointed it out made a lump sum payment to them (minus the tax and NI deduction) and they then said I had to pay the full amount including what was taken in tax back to them as well.....had some interesting emails to say the least til I asked them to show their workings as I sent mine through (which were right).

Is it part of your job to answer these questions? Or are you being put upon?

I think lots of people don't realise bonuses count as normal income and they affect all your deductions. I never did

Oh god, the different cards and vouchers!!!!’ At least that is one process that is now simplified.

If you think Hmrc are bad on PAYE you should see them on CIS