Tax on 6 months of work

C.D.

Hey guys, just a quick question. The OH finished college this year and has started a job paying mid thirties. A portion of this is paid out as a lump sum of shares or cash and tax for that is calculated when paid out. The remaining income is paid out on a fortnightly basis and comes to about 30k. The first pay day has arrived and the amount of tax paid is equivalent to the tax on salary of 30k (checked with Deloitte's online calculator).

Now my question is, should the tax paid be equivalent to the tax due on a salary of 15k (i.e. much less tax) as she is only working 6 months of the year and her income for this tax year will be equal to 15k? Or should she be paying tax for a salary of 30k and just claim it back at the end of the tax year?

Thanks for the help and sorry if it is not very clear! I thought she would be paying tax on a salary of 15k as this is what I have done during summer jobs and the like.

derand

Not sure I properly grasp the backgound facts, but the higher tax may be because the non-cash element is being factored in as a benefit-in-kind. That aside, I would have expected tax to be calculated on actual salary to be earned for the remaining 6 months (assuming the 30k figure is the annualised amount). The PAYE system is set up to operate this way - have a look at the payslip...am I making sense!?

C.D.

derand wrote: »

Not sure I properly grasp the backgound facts, but the higher tax may be because the non-cash element is being factored in as a benefit-in-kind. That aside, I would have expected tax to be calculated on actual salary to be earned for the remaining 6 months (assuming the 30k figure is the annualised amount). The PAYE system is set up to operate this way - have a look at the payslip...am I making sense!?

The non-cash element is not taxed until paid out as the share option is tax free (subject to terms and conditions). So her employer is right to be taxing her at a 30k p/a rate, meaning that the excess tax will have to be claimed back? Thanks!

namenotavailablE

Her employer is correct to tax her on the gross she earned in the first pay period- so if she earned gross pay of €1154 in the fortnight (30000/26) then she would have the tax calculated on this amount.

However, if she hasn't previously worked this year in any job then she would have accumulated approx 6 months/ 24 weeks of unused tax credits to reduce the tax on her earnings for that period. I'd have expected that these would have reduced her first tax bill to a very low amount- most likely zero.

If, however, she had worked elsewhere (part-time? College job?) and gave her employer a P45 from that previous job then she probably wouldn't have any unused tax credits available to reduce the tax on her first pay packet from this employer.

You can check the situation by downloading my tax calculator spreadsheet-

http://taxcalc.eu/monthlyss

C.D.

Thanks guys. Forgot to say that she has not worked previously during this year! Looks like she will be going up to Payroll on Monday so she doesn't pay that extra tax.