Do you understand how PAYE works?

[Merryoldgoat]

Just that really.

I run payroll and get queries which, to me, seem pretty basic. However as I understand tax I can’t decide if I’m being unreasonable getting irritated.

eg. Someone (a higher rate tax payer) wondering why they have paid an additional £400 in tax after getting a £1000 bonus.

To me that seems completely obvious but maybe it’s not.

so:

YABU - I get paid via a payroll and don’t understand how PAYE tax works

YANBU - I get paid via a payroll and understand how tax works and would expect tax to increase with additional payments.

Can't vote.
I understand how tax works but I am always disappointed with what's left after I've had a pay rise .
But I would expect that someone who is on 40%rate to be able to compute the 40% reduction

I kind of know how it works; but like the previous poster am still disappointed how much tax goes up with a bonus as it’s all at 40%

@Bankholidayhelp well so would I. And yes, disappointment aside, I’m glad you understand as I was wondering if it’s that complicated. I think it’s simple but I appreciate that’s my job.

I’ve voted not unreasonable, because I understand it fully. 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

@BlissfullyLonely

I agree - it’s really bad. I think I might do a little explainer for some staff - maybe a PowerPoint on our intranet

As in it’s bad it’s not taught.

I understand how it works but I have to say I have 4 jobs and it's been quite challenging getting the right tax codes and the tax free allowance split properly.

I think people forget they have used up their tax free bit, so whole bonus is taxed and if they remember, they are still dissapointed.

I do hope that your 'higher rate tax payer' isn't the Finance Director...😐

It’s not that I don’t know how it works, I get it, and I know £400 is the correct amount, but when your paid extra and £400 has come out, it’s so painful you think, how the hell can it be £400!!

I think it’s more disbelief than being thick.

Nope but is senior management.

Shame that a higher rate taxpayer isn't capable of working that one out. I hope their work doesn't include anything with numbers.😂

I’ve not voted because I too work in payroll and spend a lot of time explaining such matters but unless someone tells you this in the first place, how are you to know.

But there are plenty of explanations online - before I worked in payroll I looked up how it worked because why would you not want to understand your own money?

🤐

I have the same issue- two jobs, but one is company director and I don’t take a wage from that, but they keep assigning my personal allowance to that and teaching me in full on my actual job!

Nothing surprises me anymore, it used to really irritate me, a large part of my job is to understand user needs and implement software solutions.

“User error” is a pandemic - but my job would be less well paid and less interesting if all
of us (me included!) where not a bit daft or ignorant to certain things.

As a line manger I usually field the payroll queries though and only pass over the genuine ones - like this tax code is completely wrong etc

Yeah, it’s shocking how little people take responsibility for their own money. I expect many many mistakes are never picked up.
and it is taught in schools in all sorts of ways (teacher)

In my experience of helping DS sort out his (overpaid) tax and tax codes with HMRC when he was a student, it would appear that some of the staff at HMRC don't understand how it works either! I had to advise him to insist on speaking to someone more senior to get any common sense.

I understand the basics of PAYE.

With bonuses specifically, I understand that a standard rate tax payer who receives a bonus will be overtaxed in bonus month.

I think it's because the payroll system thinks the employee is going to earn that amount for the rest of the tax year, though I don't actually understand why PAYE imposes higher rate / additional rate on someone who doesn't actually exceed that threshold.

I also understand that the overpayment will be refunded over an undetermined period following bonus month, unless it's at the end of the tax year in which case the refund might work differently.

I know month 1 / week 1 tax codes screw things up royally.

Exactly how it all works is completely alien to me. I do actually trust that it is correct, as I genuinely believe that PAYE is one of the few things that the state has done very well indeed.

I’m hiring if you’re interested… that’s way more understanding than many people who actually work in payroll.

@ohtowinthelottery

Oh Christ don’t. Some HMRC staff are brilliant but it’s… patchy…

I'm an actuary - so mathematically and financially literate - and it still took me forever to reconcile my national insurance when I got back from maternity leave and sat down to check my payslips. I don't know that I was every fully convinced tbh! PAYE is pretty logical, but if you've never had to work it out then I guess people don't give it much thought.

Yanbu. It's simple maths.

Any taxpaying adult should understand that if they are a higher rate taxpayer, any additional income is taxed at the higher rate.

Or does this person think that bonuses are somehow not taxable?!

Or does this person think that bonuses are somehow not taxable?!

I honestly have had people asking why overtime or bonuses are taxed and ‘are you sure that’s right?’

To be fair. When you can physically worse off for taking a bonus. Especially at 100k it is probably more disbelief. A 20k bonus can easily be 4k after deductions. On no planet is that right.