UK taxes; taxes refunded due to low income?

Caution, caution, caution! Not everyone coming to the UK is entitled to the UK personal allowance (the law changed back in 2008).  If non-UK income including before arrival or from a rental property back home was greater than £2,000 than the personal allowance of £7,475 may not be available. Read HMRC6.

Only if claiming non-dom/non-OR status.

Thanks for the information provided in this thread!  Sorry to the OP for posing my next question, but  I am in a similar situation, where I started working (part time) at the end of October.  

I just received my first paycheck, and it seems I'm being taxed at the "emergency rate" (That's what my UKC friends called it; not sure of the actual name), but the taxes taken out were approximately 20%, and another ~5% taken out as NI Contributions.

I was going to file the P46 this week, but would it be more speedy if I just called the 0845 number you listed? I'd like to have everything sorted before my next paycheck (in 2 weeks).  Will the money be refunded through my paycheck, or do I have to claim the money back at the end of the tax year? If so, what forms will I need to file?

Thanks a million!

ETA:  The tax code listed on my payslip is: 0T W1

747L1 means you are taxed on a Week1/Month1 basis (i.e. not cumulative). Therefore, you will not receive the personal allowance for the 3 months you weren't working (you said you started July, so April, May, June).

Therefore, call HMRC on 0845 300 0627, and ask to be put on a cumulative tax code (747L); this will give you the personal allowance for the weeks you weren't working. You should receive the money back in your paycheck.

Thanks for the help, I'll ring them this week and ask them to change my tax code, thank you!

Caution, caution, caution! Not everyone coming to the UK is entitled to the UK personal allowance (the law changed back in 2008).  If non-UK income including before arrival or from a rental property back home was greater than £2,000 than the personal allowance of £7,475 may not be available. Read HMRC6.

In my case though, I haven't worked or had any income in the USA since Dec. 2010, when I left to move to the UK. I came on a fiancee visa, so I didn't have permission to work until the spring of this year when I received my FLR.

I just received my first paycheck, and it seems I'm being taxed at the "emergency rate" (That's what my UKC friends called it; not sure of the actual name), but the taxes taken out were approximately 20%, and another ~5% taken out as NI Contributions.

I was going to file the P46 this week, but would it be more speedy if I just called the 0845 number you listed? I'd like to have everything sorted before my next paycheck (in 2 weeks).  Will the money be refunded through my paycheck, or do I have to claim the money back at the end of the tax year? If so, what forms will I need to file?

Thanks a million!

ETA:  The tax code listed on my payslip is: 0T W1

0T W1 is not the emergency tax code - 747L is the emergency tax code. However, 0T W1 means you'll be taxed on a non-cumulative basis, with no personal allowance - meaning taxed @20% on first £673, then 40% on next £2200, then 50% on the rest, reset each week.

Should you call HMRC or file a P46? I would suggest you ask your employer whether they filed a P46 for you (with no box ticked). If so, then call HMRC. Otherwise, file the P46 with box A ticked (assuming this matches your circumstances) with your employer.

Either way, you'll get a refund in your next pay cheque. (Depending on how long it takes for HMRC/your employer to process).

Your tax code has no effect on National Insurance, which should be charged at 0% for the first £135 per week, 12% on next £681, and 2% on the rest. Weekly!

The P46 is not filed. It is simply handed to your employer with the right boxes ticked (or not ticked).  The employer will then be a position to operate a normal code.

The UK system has had cumulative codes since PAYE was introduced in 1944. It is still a unique feature to the UK withholding system, so may take time getting used to.

Thanks tiekey and guya for clarifying things a bit.  I'll ask my manager tomorrow what was done regarding my P46 (where box A does match my circumstances), and figure it out from there.

Out of curiosity though, I'm unclear on the difference between cumulative and non-cumulative codes; and who is/isnt entitled to a personal allowance.  I'm guessing the Personal Allowance depends on how much foreign income you have??  I've not worked since August 2010, so that's a different tax year completely, and presumably wouldn't be considered. 

The P46 is not filed. It is simply handed to your employer with the right boxes ticked (or not ticked).  The employer will then be a position to operate a normal code.

It most certainly is filed. The employee hands it in to the employer, and the employer must file it with HMRC (electronically) by the first payday (unless box A or B is ticked, and weekly pay is under £102 per week, in which case the employer hangs onto it until pay reaches £102 per week.

In any other case, the P46 is filed by the employer.

The P46 is only used when the employer doesn't have a P45 from the previous employer. For example, it has been lost, or this is the employee's first job, or employee hasn't left previous job (i.e. a second job).

Assuming box A or B is ticked, the employer operates the emergency code on a cumulative or week 1 basis (747L or 747L/W1 respectively.) If the employee has a second job, he'll tick box C, which will give him the tax code BR, meaning all income taxed at a straight 20%.

If he doesn't fill in a P46 nor hand in a P45, the employer has to do it for him, and apply code 0T/W1. This gives zero allowance, and is taxed at 20%, 40%, and 50% depending on amount.

Out of curiosity though, I'm unclear on the difference between cumulative and non-cumulative codes

Non cumulative means that if you're paid weekly, you get 1/52 of the annual allowance (for each tax band) per week, without regard to previous weeks. (If monthly, then 1/12 per month).

Cumulative means that you get the entire allowance for the year to date, minus any pay to date.


So if someone earns as follows - assuming Monthly payroll, with a tax code of 747L (emergency code, cumulative) verses 747L/M1 (i.e. emergency code, non cumulative)

Let's say you earn gross, as follows:

April 0
May 0
June 1000
July 1000
August 500
September 2000
October 250
November 10000
December 500
Jan 0
Feb 0
Mar 100

Then on a 747L code, the tax will be as follows:

April 0
May 0
June 0
July 0
August 0
Sept 152
Oct (74.60) refund
Nov 1875
Dec (24.60) refund
Jan 0
Feb 0
Mar (354) refund
Total £1574

Whereas, on a non cumulative code, the tax will be as follows:

Apr 0
May 0
Jun 75.20
Jul 75.20
Aug 0
Sept 275.20
Oct 0
Nov 3167.06
Dec 0
Jan 0
Feb 0
Mar 0
TOTAL = £3592.66

In all cases, National Insurance contributions are non-cumulative, unless you are a company director, in which case they are always cumulative.

So, if not a Director, NI contibutions will be:

June 47.76
July 47.76
Sept 167.76
Nov 481.76
Total 745.04

and if a director:
Nov 903
Dec 60
Mar 12
Total: £975

and who is/isnt entitled to a personal allowance.  I'm guessing the Personal Allowance depends on how much foreign income you have??  I've not worked since August 2010, so that's a different tax year completely, and presumably wouldn't be considered.  

Almost everyone resident in the UK is entitled to the personal allowance.
The exceptions are:
1) If you earn over £100,000 per year, you'll lose £1 of the PA for every £2 over £100k you earn.
2) If you claim to be non-UK domiciled, claim the remittance basis (which means you only pay UK tax on foreign income when you bring it into the UK, not when you earn it), and have over £2000 of foreign, non-remitted earnings, then, in most cases you'll lose the PA (but it depends on particular dual taxation agreement; from memory, if you are Dutch, you keep the PA). If you are non-domiciled, have more than £2000 in non-remitted foreign income, and are UK resident for at least 7 of the last 9 years, you'll also have to pay a £30,000  annual levy (£50,000 if here more than 12 years). These people will probably be earning over £100,000 anyway, so will lose the PA for that.

If you are non-resident in the UK, you'll have a PA if you are a EU citizen, or, depending on your circumstances, sometimes even if not.

I am glad we agree that most folks resident in the UK can claim the personal allowance. Phew!

However 99% of the users of this forum are not domiciled in one of the countries of the United Kingdom.

For anyone newly arrived who is simply a US citizen (and nothing else) the correct question is whether gross non-UK income during the UK tax year is greater than £2,000 or not (including income pre-UK arrival and whether or not the income is taxable for US tax purposes).  If this total is greater than £2,000, than claiming the UK personal allowance means reporting on the arising (worldwide) basis on the UK tax return.