Sudden tax increase on the payslip (cumulative basis)

nacho66

I'm on cumulative tax basis and the payslip I've just received is a bit worrying. Let me explain a full year's story first

First of all, I'm on joint assessment with my wife. Till 31 August I was working as sole trader, which means I wouldn't make any real use of mine or my wife's tax credits until filing a tax return.

Since 1st September I'm PAYE. My payroll received tax credits from revenue and during first two months on PAYE (September and October) I paid very little tax, about 6% of the monthly gross salary. I've just received my payslip for November and the tax deduction is now about 23%.

Payroll says they get all info from ROS so can't really explain to me what happened. I was under an impression that because I'd have only 4 months in 2013 on the record (cause tax from sole trader period would be only 'registered' by filing tax return next year) I would have the tax credits (both mine and my wife's) would be spread out evenly between all 4 months. In fact, I compared my payslip with the slip from a person at work and he seems to have tax deduction pretty much the same throughout the whole year. But for me it now all of a sudden changed and just the PAYE part of deductions gone from 0 last two months to over 400 quid.

Just to add, my wife was working as PAYE whole year until middle of September when she started a maternity leave. Not sure if that would matter or can affect tax credits.

Can you help me understand what might have happened? Does this sound right? Or is there a mistake possible?

Mrs OBumble

Sounds like Revenue reviewed the situation recently - perhaps upon getting some record to do with your wife's Maternity Benefit (which is tax deductable, BTW).

Best thing to do is ring Revenue and ask them. Among other things, because you were self-employed you should still be income tax registered for this year, anyway. But they may have allocated some of your tax credits for the year to cover this, thinking they were doing you a favour and stopping you from having tax owing at the end of the year.

nacho66

But I don't understand how would they use my tax credits on wife's maternity leave? Isn't only unused tax credits transferring between spouses? How can it ever affect my salary?

Mrs OBumble

They may have applied some of your unused tax credits to your "other income". Your wife's maternity being set up may just have been the trigger point which caused them to do this.

Or maybe they just put you on Week 1 or something: they may seriously have thought they were doing you a favour by stopping you from having tax to pay at the end of the year. (Mmm ... there's a thought ... seeing as you were self-employed for part of the year, then it's possible that the rules say you should not be on cumulative. Maybe the mistake was actually made back in August.)

Or they just made a mistake.

Seriously, the only way to find out is to contact them.

nacho66

Will continue in this thread. Was just looking at our (joined assessment with my wife) tax credits and I don't understand parts of it.

Tax Rate Band is normally supposed to be at 65k for joint assessment. My wife has 3 months of her maternity leave left. Rate Band breakdown deducts almost 14k as Maternity Benefit and 9k as Allocation of other income. First of all, what is this 'other income'? Second of all, how is this possible that maternity benefit (combined with this other figure) lowers the rate band to only 42k!? This seems extremely low! Based on that, revenue allocated our monthly bands at 2,4k and 1,3k. Does this look right?

Also, I know that we can allocate tax credits differently via PAYE online but I still don't know what the other income figure is. It's an enabled field on the system so I can change it even to 0, but what is that? Any idea? Could it be some assumed figure due to me still being registered as sole trader? (even tho I'm full time paye)?