I have just taken over the bookkeeping and payroll for a pub.
I have set them up on Xero and also set up an auto enrolment account with Smart pensions. All is working just fine with the exception of one employee.
He works 37 hours a week at £8 an hour. His opening balances (I took over after week 8) were gross pay to date of £2,304 with tax paid of £95.80. After the first 4 weeks Xero gave him the tax paid of £95.80 back and did not deduct anything further, then when we got to week 16 no tax was deducted again.
I queried this with HMRC who said that to week 16 £191 tax should have been deducted. I took this up with Xero who stated that because he is on a 4 weekly pay cycle and is in the pension scheme Xero is working correctly by not deducting any tax. He is paying 3% a month in to his pension scheme which amounts to £34.56 a month. His 4 weekly gross is £1,152.
I understand that the Pre-Tax pension deductions will reduce the employee's taxable pay, therefore, based on the employee's taxable pay to date it looks like no PAYE would be due.
What I do not understand is how the 4 weekly calendar can affect the calculations and the tax threshold for the period. HMRC have told me one thing but their online calculator tells me something else. I do not want to just think it is correct and then the employee gets a tax bill further down the line.
Could anybody offer me some advice please?
Thanks
-- Edited by Purple on Tuesday 14th of August 2018 08:50:25 AM
Can you please pop your name so that it appears on your posts, under the signature bar. First name will do, just makes it a bit friendlier than just calling you 'S'. (Edit profile --->signatures).
I would normally say - never take any answer you get from HMRC as gospel, but in this case they might well be correct.
I wasnt sure with all the numbers if you were wanting someone to check this out for you?
If so there is a main chunk of info missing which would assist ie the tax code.
Also £37h pw @£8ph I get to £1184, pre pension so I think there may well be an issue with the numbers.
Based on the correct gross and a basic tax code I agree with HMRC at c£191.
Zeero smeero is wrong, but it is worth going back and checking ALL the figures inputted before you get on their case v what you told them/HMRC.
The calculations are affected by them being 4 weekly v monthly as there are 13 pay/tax periods in the tax year as opposed to 12. Bit like sometimes there can be 53 weekly ones rather than 52.
You can check it out manually quite easily.
37x8 x4, less pension, less tax free amount x20%= £47.58 x 4pay periods is £190.32 (ASSUMING 1185L tax code and no other issues/adjustments etc)
Also - mgiht be worth checking the tax tables and doing it manually - HMRC still published them last time I checked.
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Thanks for your reply. My name is Trisha, I agree, much friendlier!
He does 36 hours a week, apologies, not 37 and he is on tax code 1185L. His deduction for pension each month is £34.56 with no other deductions. I have just run a check on the HMRC calculator and it is telling me that no tax is due... but from my own calculations and yours tax is indeed due. So it is HMRC and Xero saying one thing and good old fashion manual calculations saying something else.
I have sent an email to Xero support as something is wrong somewhere!
