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Payroll

PAYE Tax and Annual Exemption limit of £12500

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Software should charge tax when salaries earnings exceed the limit of present personal allowance exemption £12500, but payroll software start deduct tax from first salary income of September 2020 (Salaries 2500 pm). Is there matter with my software (Money Payroll Software) or there is concern with my usage of software. Please guide how to fix this

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By Paul Crowley
25th Sep 2020 20:01

2500 x 12 = 30,000

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By Tarique
25th Sep 2020 20:05

Tax should be deducted after exceeding £12500 that means after 5 month of salaries 2500 x5= 12500

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By Paul Crowley
25th Sep 2020 20:09

No

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By Tarique
25th Sep 2020 20:14

Then how it works, sir

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By Paul Crowley
25th Sep 2020 20:22

HMRC looks to collect tax monthly
PAYE coding should be 1250
Payroll software spreads the 12500 over 12 months
Tax free should be £1041 per month, all above that gets taxed in the month
It is fair, results in the same net pay every month, not tax free for 5 months then lots of tax for 7 months

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Replying to Paul Crowley:
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By Tarique
25th Sep 2020 20:50

Thankyou sir

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By Paul Crowley
25th Sep 2020 22:32

Also thank you for your politeness
See Marix below
if you have entered code correctly the software should give the correct answers

You have good quality software
If the employee is a director then then the correct box should be ticked.
For a director the National insurance works differently
National insurance for a director gives all relief in the early months

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By Tarique
25th Sep 2020 20:50

Thankyou sir

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By Matrix
25th Sep 2020 21:33

It depends on the tax code, sounds like a W1M1 code so check. I find that Moneysoft is usually correct, assuming you have input everything correctly.

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By SXGuy
26th Sep 2020 00:09

Edit: already been answered

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By carnmores
26th Sep 2020 12:48

as stated its all in the tax code it is that which governs tax deductions not rules of thumb

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