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New employee PAYE

Sage Payroll has calculated NI but zero paye for a new employee who will exceed the threshold.

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Hello, I'm a few months into a new job and have come across something unexpected in payroll. It appears that Sage Payroll, which a colleague uses, has calculated NI but no PAYE for a new employee for the first four months. In the fifth month they have been charged PAYE. The employee ticked box A in the new employee questionnaire (this is my first and only job since 6th April). The employee is permanent, salaried and their salary exceeds the personal allowance.

I was surprised to see this as I had expected that their unused personal allowance for the financial year would be spread over the remaining months of the financial year, meaning that they would pay PAYE every month from the start. 
 

Does it seem right to you or could the set up in Sage Payroll for this employee be wrong and in what way? 
 

 

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By Paul Crowley
20th Dec 2021 13:29

It sounds correct to me
Not worked for 6 months and getting a cumulative coding means 7 months tax free allowance in first month of working
It has been like that for quite a while

"I was surprised to see this as I had expected that their unused personal allowance for the financial year would be spread over the remaining months of the financial year, meaning that they would pay PAYE every month from the start."
No such system has ever existed

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Replying to Paul Crowley:
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By McGrumbles
20th Dec 2021 13:43

Thanks Paul.

Although if that employee stays with the company and enters a new tax year, the personal allowance gets spread evenly over the future 12 months i.e pay rises and bonuses aside, salaried people expect to get the same net pay every month.

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Replying to McGrumbles:
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By Paul Crowley
20th Dec 2021 15:44

Once employee starts paying tax, the result in (probably month 2) is that employee gets a net that does not change much between different tax years

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Replying to Paul Crowley:
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By Hugo Fair
20th Dec 2021 16:07

But the employee shouldn't really think in terms of net pay 'not changing' ... and should make the effort to understand the basics:
* Personal Allowance is the amount (across all of a person's PAYE employments and self-employments in a particular tax year) that is free of tax.

So any variation (more/fewer hours, pay rises or one-off bonuses, second jobs or other earnings on the side, pension receipts, etc) will change not just total gross pay - but potentially how HMRC allocate the single Personal Allowance across a multitude of Tax Codes, one for each of any distinct sources of earnings.

In other words, the mechanics are (fairly) simple but the impact on net pay in one particular job may not be!

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Replying to McGrumbles:
RLI
By lionofludesch
20th Dec 2021 18:48

McGrumbles wrote:

Thanks Paul.

Although if that employee stays with the company and enters a new tax year, the personal allowance gets spread evenly over the future 12 months i.e pay rises and bonuses aside, salaried people expect to get the same net pay every month.

That's not how it works.

In month 1, you compare a twelfth of the personal allowance with what has been earned.

In month 2, you compare two twelfths of the personal allowance with everything that has been earned since 5th April last. Take away what has already been paid and deduct the rest from this month's pay.

In month 3, you compare three twelfths of the personal allowance with everything that has been earned since 5th April last. Take away what has already been paid and deduct the rest from this month's pay.

And so on.

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By McGrumbles
20th Dec 2021 14:13

Understood now. This link helped me if anyone is interested https://www.brightpay.co.uk/docs/21-22/starters/tax-codes-to-use-for-new...

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