Income tax

[Cashwhat]

I'm salaried at £51k pa, but have been doing additional project work for a bit which has bumped me up to £76k YTD (from last April).

I've dropped back to my basic pay as the project is complete but obviously still getting hammered on the tax side of things due to accumulated earnings (net pay was £2.6k this month). Am I right in thinking my tax will be reset come April, so I'll revert back to c£3k per month instead?

Please help me oh wise Mumsnetters? I'm a lone parent to three kids with no help from the ex and had to buy him out of the house, so I'm budgeting to within an inch of my life constantly.

Yes, You should find from April your income tax resets and you will go back to the appropriate tax for your income.

Yes. And if you are currently paying too much (which you might be, if the projection was that your wage would stay the same), you should get that back too, probably via a tax code adjustment so they take less for a while.

If you get the HMRC app you can check what your projected income is for the year and if it’s wrong you can change it: that might address this a bit sooner (if you are overpaying at the moment).

Ah brilliant- thank you. I'll take a look at the Afro, I didn't know there was one available.

@Cashwhat
If you haven't thought of this already, please remember you will also have to pay back Child benefit if you've earned that much. It will sting if you haven't.

However you can mitigate against this. If you pay extra into your pension or give money to charity, to reduce your net income, you will get to keep your child benefit and get a 20%tax rebate. Plus then the money is there in your pension plus the other 20% income tax goes into your pension too. So you can get at it later. If you can't pay into your workplace pension you can do this via a SIPP. Just do it before end of the tax year.

@HeyDiddleDee

Yes. And if you are currently paying too much (which you might be, if the projection was that your wage would stay the same), you should get that back too, probably via a tax code adjustment so they take less for a while.

If you get the HMRC app you can check what your projected income is for the year and if it’s wrong you can change it: that might address this a bit sooner (if you are overpaying at the moment).

I'm pretty sure that your tax code has nothing to do with how much you may earn in the future. Your tax is worked out each month for that month taking account of what you're already been paid. You don't get a new tax code if you get a pay rise or pay cut

Thanks, I've already cancelled CB this year abs last as I often do project work and end up having to salt the money aside to pay back after I've completed my self-assessment. I work for a life co, so pension is all good, but thanks for highlighting.

No idea on the tax code stuff, I just know that I'm still being taxed at a higher amount this month on my "flat" wage that would be expected I.e. the £2.6k rather that >£3k.

Really appreciate all the comments thanks.

@Cashwhat

No idea on the tax code stuff, I just know that I'm still being taxed at a higher amount this month on my "flat" wage that would be expected I.e. the £2.6k rather that >£3k.

Really appreciate all the comments thanks.

I don't quite understand that but unless the payroll computer system is broken you can't be taxed on money you haven't earned in that month

I honestly have no idea on tax stuff bar the basics. Is it worth asking my payroll guys or will I look like a dick 🤣

Actually perhaps I'm wording it very badly. I'm assuming I'll continue to be taxed at 40% on all earnings now until the end of the tax year as I've exceeded £50,270 limit for this tax year's earnings.

My expectation would be from April's pay that I'll be on £51k (with an adjustment upwards to reflect pay review so probably £52k) and will be taxed at 20% on anything exceed the lowest tax band up to the third level threshold (which should be minimal).

@Cashwhat

Actually perhaps I'm wording it very badly. I'm assuming I'll continue to be taxed at 40% on all earnings now until the end of the tax year as I've exceeded £50,270 limit for this tax year's earnings.

My expectation would be from April's pay that I'll be on £51k (with an adjustment upwards to reflect pay review so probably £52k) and will be taxed at 20% on anything exceed the lowest tax band up to the third level threshold (which should be minimal).

That isn’t how payroll works. Each tax allowance element is divided by 12 so each month some salary is taxed at 0%, some at 20%, and some at 40%. If you go over £100k the tax free element starts to reduce.

Personal allowance £12,570 / 12 = £1,047 per month taxed at 0%
Basic rate £37,700/12= £3,141 per month taxed at 20%
Higher rate = anything over £4,188 per month is taxed at 40%.

So you should find your tax reducing in line with your salary in Jan, Feb and March.

That's simple enough for my brain to understand - thank you!

Be aware that there is a stealth tax starting from 2022 upto 2026. The tax allowance and bands are being frozen, whereas previously they have rising. Personal allowance has risen by 6% from 2018 and basic rate tax band by 9% during the same period. So, if you are currently close to the basic rate threshold (£50,270) then any rise you receive will likely be taxed at 40%. Bearing in mind that CP inflation is running over 5%, and likely to continue this could add up.