Income Tax Code Calculator
August 27th, 2009
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Question: How much tax should I be paying?
Ok. I know nothing about tax codes and how much I should be taxed. I have been on several ‘tax calculators’ on the web and have found nothing that resembles what I am actually paying for Income tax and National Insurance. I am on Tax Code 653L and my N.I code is A. What percentage of my wages should be taxed? I’m trying to work out if I’m paying more than I should be because a colleague of mine is on the same contract as me, has no tax allowances and pays around £100 less tax per month than me. Thanks for your time
Answer: It’s not quite true that everyone working in this country has tax allowances. That only applies to British citizens. Anyone coming to work here from abroad has to establish their residency, without which they would be taxed at Basic Rate. That can be done by completing form P86.
You will have a basic tax-free personal allowance of £6475 a year (period 6th April to 5th April). I am guessing that you get a £60 a year expenses in employment tax relief to make your code up to 653L. We can’t analyze your deductions, because we don’t know the pay/tax/NIC figures or frequency of receipt.
We don’t know your colleague’s personal circumstances. No tax allowances would make him liable to a 20% straight tax deduction, yet you say he pays less tax than you. He is paying some tax, therefore he has not recently become bankrupt or is resident abroad, which may mean no tax. He must therefore be getting some tax allowance, and my personal guess is that he may be getting credit through his code number for a tax overpayment in an earlier year, resulting in lower deduction this year. Have you seen his payslip? He could be just winding you up, or perhaps he has lower wages. What about his age? Is he 65 or over? That would affect his tax.
Everyone’s deductions are of a different percentage of their wage, because of the tax/NIC-free elements. http://www.listentotaxman.com used to give deduction percentages, but doesn’t now, mainly because it isn’t relevant. You can check yourself by Googling “percentage calculators”. There is quite a choice.
For NIC, you get 11% deducted once your weekly wage exceeds £110. The letter A relates to your category, a single/married person, who isn’t in a certain type of employer’s pension scheme.
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