Business & Finance

Income Tax Query

Hi,

I am currently a student who has 2 jobs. To avoid paying income tax, I arranged with the Inland Revenue to split my tax code between the 2 jobs - allowing me to work both and not pay tax as I earn under the personal tax allowance.

In October this year (half way through the tax year) I will graduate and commence employment on a salary circa £20k. Clearly, at that point I will resign from the other 2 jobs and ask for my full tax allowance to revert to my main job.

My question is, am I disadvantaged in any way by doing this or am I better off immediately asking for my full personal allowance to be placed on only one of my jobs I am currently working at the moment i.e immediately ask for my split tax code to revert to its original status? ( and just pay tax on my second job for the next few months). Does this make sense?

Thanks for any help anyone can give me here!

foodluva Fri 09/05/08 21:35

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buildersmate
Fri 09/05/08
21:47

It makes absolutely no difference at year end because HMRC tot up your earnings from all sources, deduct your personal allowance coding then charge you income tax at the appropriate bands on the whole earnings. They then compare to what's been deducted by the employers. If you've paid too much you get a refund and vice versa.

The logic and what you are going currently works because your first job does not pay enough to hit the tax threshold, and the general ruling is that HMRC get the second employee to deduct tax at Basic Rate (20%) using a 'BR' coding. Most people's first job (of several) usually pays enough to put them into a tax paying bracket so charging the second job at Basic Rate tax is correct for many people.

foodluva
Fri 09/05/08
21:50

Question Author

Buildersmate you are a star! Thank you!

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