PAYE Tax Codes

PAYE Tax Codes

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Say Employee 1 is on 522L

Employee 2 is on 522L W1/M1 (week 1/month 1 basis).

And how does it affect on Income tax and NI deductions Total paid to HMRC would be the same or different for both employees.
Anon

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By bigdave1971
11th Aug 2007 14:46

It depends
It will make no diffence to the NIC at all.

The PAYE would differ if the employees pay fluctuated significantly during the year, ie large bonuses paid in one week/month and none paid in other weeks/months.

The person on 522L would pay less overall if the above happened.

Obviously any tax overpaid can be reclaimed at the end of the year from the tax office.

Also if the employees are just commencing the employment then previous employment figures could affect the tax paid in the first week/month.

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By neileg
13th Aug 2007 08:05

Basis
Normally tax codes are operated on a cumulative basis. In each pay period, the tax on the total pay to date is caculated using the time apportioned value of the free pay from the tax code. The total tax already deducted from pay is compared with this value and the difference applied to calculate the net pay for the period.

With a W1/M1 code, each pay period is treated in isolation and does not take into account pay or tax deducted from previous periods.

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