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How does a tax free allowance work?

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c_dug
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PostPosted: 11:55 - 01 Jun 2013    Post subject: How does a tax free allowance work? Reply with quote

My tax was a bit messed up at work and I am trying to work out what I am due to get refunded to me. Since January I have been on a 0T tax code which means I got no tax free allowance. My correct code has now been calculated as 944(L I think if it makes a difference).

I don't really get how it works though? I get that you times it by 10 and that tells you your tax free allowance (So I get £9440 untaxed) but how does it work on the pay side of things? Is it a case of dividing the 9440 by 12 to get the monthly allowance? That being the case does it mean I am owed the best part of £750 a month back? Which seems like far too high a figure! Or the tax from everything over the £750? Or 20% of £750 a month? Really I'm just a bit/very confused by the whole thing.

I should have all of the money back by the end of the month but I have a lot of things to pay for this month so it would help to know roughly what I am due back so I can budget my money properly. I did ask hmrc on the phone what I was due back but they said I would have to wait two weeks for a proper report to be done or something.

I'm not shy about money so if knowing income figures will help work out the amounts please say, but for the time being I am in the bottom tax bracket which is 20% or so I think.

Thanks

Conan
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Pete.
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PostPosted: 12:01 - 01 Jun 2013    Post subject: Reply with quote

Go here and put in your weekly/monthly pay and it will spit out a report of what tax you should have paid. Compare that to what you have paid and the difference should be a good guide to what you'll get back.

https://www.incometaxcalculator.org.uk/
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c_dug
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PostPosted: 12:07 - 01 Jun 2013    Post subject: Reply with quote

Thanks for that, perfect.

Still interested in how the £9440 allowance itself effects my net income if anybody knows.
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Pete.
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PostPosted: 12:53 - 01 Jun 2013    Post subject: Reply with quote

If I figure it right you are paid monthly and you have paid tax on all of your earnings, so £750 a month allowance @ 20% means you have paid £157.33 a month too much tax.
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yambabe
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Joined: 12 Jul 2004
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PostPosted: 14:03 - 01 Jun 2013    Post subject: Reply with quote

It works like this if you are on 944L.

Every month you get paid your wage.

The first £748 you pay no tax on.

Anything over that you pay 20%, up to a gross wage of £3415/month.

If you earn more than £3415/month you pay an additional 40% of whatever you earn over that.

HTH.
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YBR Ric
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PostPosted: 10:52 - 07 Jun 2013    Post subject: Reply with quote

Income tax, don't you just love it.
How I long for the good old days when I used to pay tax at 60%.
Not so much for having to pay that particular tax rate, but just to earn that amount of money to pay it.
These days the main tax I pay is in the form of VAT Evil or Very Mad
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