I am new to payroll and wondered if anyone could clarify a few questions:
When an employee leaves a job mid way through the tax year and starts a new job as a casual employee (working as and when required) how are the tax deductions calculated if they have no annual salary etc?
Also, similiar to the above, could someone provide an example breakdown of how tax is calculated when an employee leaves a job mid way through the year and then starts a new full time job. Would the remaining tax free allowance be deducted from the projected salary until the end of the tax year to give the taxable amount?
I am new to payroll and wondered if anyone could clarify a few questions:
When an employee leaves a job mid way through the tax year and starts a new job as a casual employee (working as and when required) how are the tax deductions calculated if they have no annual salary etc?
Also, similiar to the above, could someone provide an example breakdown of how tax is calculated when an employee leaves a job mid way through the year and then starts a new full time job. Would the remaining tax free allowance be deducted from the projected salary until the end of the tax year to give the taxable amount?
Thanks
Mike
Salary, annual or otherwise, has little *direct* bearing on tax calculations.
For a normal employee on a tax code such as 810L, they will be able to earn £8100/12 each month before paying tax. This is calculated cumulatively, so in the first month the tax free allowance is 8100/12, in the second month it is 2 x 8100/12, in the 3rd month it is 3 x 8100/12, and so on. The cumulative tax free allowance is subtracted from accumulated earnings and tax is payable on the difference.
But there are many exceptions and caveats. The better answer is that a payroll system will work out as if by magic the correct tax given the employee's previous earnings (when known) and current tax code and you shouldn't worry about the workings. Where for example the previous earnings are unknown for some reason (starter without P45 eg) each week or month is calculated as if it were the first week or month in the year until HMRC instructs the employer with the full information including previous earnings on a P6 form.
