Jobs and R85s (A few simple questions about tax)

[jim]

My somewhat limited knowledge of the taxation system of Great Britain could potentially bite me in the arse in a few months, so I have some questions for the people of Hexus.

My income has never met the threshold for income tax, which AFAIK is around £6,300 or something, so I've always filled in R85s on my bank accounts so I receive gross interest on them, and have a part-time job for which my wages are paid directly into my bank account tax free.

However, I'm about to start a new full-time job in September, and am in no doubt that when added to the part-time wages I've received in this tax year I will be over the threshold, and thus will pay a certain amount of tax at a rate of 20%. Consequently, I'm a bit confused about how it's all going to work.

If HMRC takes 20% of my wages in the new job, surely given that I will only have been receiving those wages for half of the tax year, they'll take too much money off me. Will I get that back somehow?

Also, should I get in touch with my bank and tell them to cancel the R85, and start paying net interest instead? Will that help when it comes around to the end of the tax year? If the answer to that question is yes, then what about the inactive savings/current accounts that I have with R85s but only £1 credit, and hence interest that will probably be in the region of 3p, and so negligible taxable income?

I don't particularly want to cancel all the R85s, because this job is a 12 month contract after which I'll be going to uni, and my income will drop below the threshold again - obviously if it's a requirement then that's fine though.

Apologies for all of the questions, of which I'm sure some are ridiculous, but as an 18 year old who has never filled in any tax forms in his life (except when I reclaimed £0.25 from the Inland Revenue because I was angry with them for taking my money off me ) it can get a bit confusing, and I don't want to get in any bother if possible.

[Bugbait]

First of all, I'm not an accountant and my tax knowledge is focused at the Limited Company level (since I run a few). I'm also Australian so the bulk of my personal tax knowledge is based on a very different system. Disclaimers over...

Assuming a standard PAYE set up for your new job, you will be issued with a P60 at the end of each (personal) financial year (April 6th or so). When your employment terminates with any employer you will also receive a P45. Assuming your new, full time job will take you over the tax free threshold the employer will automatically deduct the required PAYE tax and associated NI payments. This will only be for the gross income received from them. Given you have other sources of taxable income, you will very likely need to submit a self assessment at the end of the personal financial year.

Not sure how this affects the P85 as this is foreign to me. I would guess that you'd have to cancel it, or at a minimum, retain it and declare the interest as part of your self assessment. Your self assessment should include P60's from both the full time and part time jobs as well as other sources of income (ie. Interest).

This is just a starter and I'd highly recommend looking at the HMRC site and/or speaking with an accountant. Don't feel bad, I work with people in their 30's and 40's who have never filed tax returns since the haven't been required to.

[jim]

Thanks for the help bugbait, it's all a bit mystifying when you've got no idea what's going on.

Someone I know has two jobs at the moment, and isn't paying any tax on either of them because both individually come under the threshold... I told her to let them know, but she seems to think she's just unbelievably lucky... she'll have a fun time come the end of the tax year I reckon

Maybe I'm just having problems because I'm actually trying to do something about it now rather than letting it happen and suffer the consequences in a while.

Any advice anyone else can give would be much appreciated.

[Unique]

the standard tax allowance is £6475 pa. you only pay tax on earnings over that in the tax year. take your annual allowance, divide by 12 and multiply by the tax month and you pay tax on gross pay over that threshold.

thus if you currently don't pay tax as you have a part time job, it depends on how much you are being paid under the tax threshold, but within the april-april tax year you can still use that allowance

the simplest thing to do is phone the HMRC employers helpline and they will explain everything to you. it's pretty simple stuff, but takes a bit of typing to explain. it's not clear if you are giving up your part time job when you go full time, or if you will have both jobs at the same time. if you stop your part time job you will get a p45 to give to your new employer and they will see your gross pay and tax to date and it will adjust your tax paid accordingly

the person who is getting tax allowances from both jobs is probably underpaying tax as they ticked the wrong box on the p46. the HMRC will find out in time and change the persons tax code to take back all the unpaid tax

[Bugbait]

Someone I know has two jobs at the moment, and isn't paying any tax on either of them because both individually come under the threshold... I told her to let them know, but she seems to think she's just unbelievably lucky... she'll have a fun time come the end of the tax year I reckon

Maybe I'm just having problems because I'm actually trying to do something about it now rather than letting it happen and suffer the consequences in a while.

Any advice anyone else can give would be much appreciated.

As per uni's post, your friend is most likely using the wrong tax code. In the first few years the HMRC "might" (totally at their discretion) overlook it by not penalizing your friend. If they believe it was deliberate tax avoidance it could be much worse. As usual when it comes to these things, ignorance of the law is not an excuse . Something to note, the HMRC can charge interest on back taxes owed which can come out to a lot, even without any fines. Personal tax records must be kept for 7 years I believe, and fraud has no time limitation.

[jim]

Coming back to this thread now because the issue has sort of sprung up again

I didn't get a P45 until after I'd started my new job, so I was taxed at the standard rate for the first 2 (maybe 3) months - my new boss recommended that I didn't bother with a P46, and instead waited for the P45 to come through. After I sorted that out, HMRC refunded all of the tax I've paid so far this year, even though I'm certainly going to go over my personal allowance before April.

I'll probably have to ring them up, but I'm really confused... I thought they were meant to balance out the tax over the course of the year but the way this is going they'll probably just nab most of my pay in March