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The Book-keepers Forum -> VAT, Payroll & Tax -> PAYE TAX
Post Info TOPIC: PAYE TAX
Netty


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Posts: 10
Date:
PAYE TAX
 

I am doing a payroll for a client, an emloyee has worked for the business for many years, but didn't work any hours in week1 of this tax year.

 In week 2 she worked 26.75 hours @ £6.08 per hour £162.64 gross  pay). Her tax code is 810L. The system has not deducted any PAYE Tax  in week 2 only Employee and Employer NI.

 

Should I have put her on a Week1/Month1 basis?

 

Any help would be much appreciated!



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Robert Pearce


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Posts: 259
Date:
 

If you haven't been told to operate on a week 1/month 1 basis by HM Revenue & Customs (and you're not in any of the situations described in this list on the HM Revenue & Customs website), you wouldn't need to do so just because the employee didn't have any wages in week 1.



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Pearce & Co - Chartered Accountant and Chartered Tax Adviser 

www.pearceandcoaccountants.co.uk

These comments are outline only and are not a substitute for specific professional advice.

Netty


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Posts: 10
Date:
 

Any idea why it isn't deducting tax? Surely its above the threshold?



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Robert Pearce


Senior Member

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Date:
 

As a week1/month 1 basis is not being used, you have to look at her cumulative tax position.  If you imagine that her personal allowance of £8,105 has been spread evenly over the tax year, the fact that she didn't have any wages in week 1 means that she had two weeks worth of her personal allowance available to use in week 2.  This is more than her actual wages in week 2, hence she paid no PAYE in that week. 



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Pearce & Co - Chartered Accountant and Chartered Tax Adviser 

www.pearceandcoaccountants.co.uk

These comments are outline only and are not a substitute for specific professional advice.
Wella


Expert

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Posts: 2112
Date:
 

Hi Netty

I think this has occured because tax is calculated on the cumulative pay to date therefor the employee can earn upto £312.24 in week 2 before any tax is due. The NI is calculated on actual pay and would come out at a small amount (£1.98 on code A).

Had this been week 1 she would have had to pay tax on the amount over her tax free amount, which would have been £6 x 20% = £1.20

Eventually the cumulative income will catch up to a point where tax will be payable

HTH

Bill



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Wella


Expert

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Posts: 2112
Date:
 

Robert beat me to it



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