Tax & National Insurance - FAQ's
Please note - this is intended as information only and not as a guide to income tax or your own personal tax circumstances. Please contact HMRC if you have any questions or queries.
Upon confirmation of the assignment, it is important that the temporary worker completes and submits the relevant tax documentation so the correct tax code can be applied to our payroll system. This will take the form of either:
- A P45 from the workers most recent employer. Please note that the P45 must relate to the current tax year running from 6th April to 5th April of each year.
- A completed Starter Checklist. This is a declaration of your employment status that can be used where a relevant P45 is not available. A downloadable version of this can be found within the useful documents section of this website.
Once we are in receipt of the documentation above we can load this information into your payroll record – this will assist us in ensuring your wages are taxed at the correct rate. Please note that we cannot make any changes to your payroll record without one of the above.
Should HR Consultancy not be in receipt of the above then we will still be able to process your wages through our payroll system. You will however be placed on an emergency tax code which could result in you paying more tax than you ordinarily should.
The majority of temporary workers employed through HR Consultancy will be taken on through our payroll system. As such their PAYE and National Insurance contributions will be taxed at source and automatically sent to HMRC. Our payroll systems are automated with the levels of tax calculated accordingly.
Where a worker has an issue over the amount of tax they are paying it should be noted that we are limited as to what we can discuss with a temporary worker regarding their tax coding as a person’s tax affairs are unique to them.
Should you have any queries relating to your tax code, we recommend that you contact HMRC to discuss with them directly. Please note that HMRC will only discuss any tax details with the individual concerned, therefore, we are unable to contact them on your behalf.
HMRC Employee Helpline - 0300 200 3300
Website – Click Here
Frequently Asked Questions
There are often recurring questions that are asked when it comes to the processing of pay. Please note that this information is correct on date of publication (21st July 2016) for Tax Year 2016/2017. Please find a list below:
Question: What is the “normal” tax coding for a temporary worker?
Answer: According to the www.gov.uk website, 1100L is the tax code currently used for most people born after 5 April 1938 with one job. This means they have a tax free allowance of £11000 per annum on which they do not pay tax.
Question: What is a week 1 / month 1 tax coding and how will this affect me?
Answer: Should a worker have a 1100L W1 / M1 tax coding then the amount of tax paid each week will be calculated as if the amount of gross earnings they earn in a week is indicative of their expected annual salary. For example, should someone earn £500 in a week, then the payroll system will tax them as if they will earn £26k in the tax year. As an example:
Weekly Gross Earnings: £500
Assumed Annual Earnings: £26000
Less Annual Allowance: £11000
Calculated Taxable Earnings: £15000
Tax payable per annum @ 20%: £3000
Weekly tax payable: £57.69
Question: What if I don’t have a Week 1 / Month 1 tax coding?
Answer: If the tax code to be applied is not on a Week 1 / Month basis then this means that the tax system takes into account not only your earnings in a given week, but also your Year to Date earnings. This may sound more complicated, but it is set up in a way to make the tax you pay more relevant to your likely annual salary.
Following on from the example above, should a worker have an 1100L tax coding, be earning £500 per week in gross wages and have earned £4000 in the tax year thus far, the amount of tax payable will depend upon where they are in the tax year. Should the pay date be October 6th (approx. half way through the tax year) then the calculation of tax payable would be as follows:
Weekly Gross Earnings: £500
Assumed Annual Earnings: £500 * 26 = £13000 + £4000 = £17000
Less Annual Allowance: £11000
Calculated Taxable Earnings: £6000
Tax payable per annum @ 20%: £1200
Weekly tax payable: £23.08
Question: Why would I be on a Week 1 / Month 1 tax code?
Answer: This will depend upon your existing tax code and whether you are on a Week 1 basis or not. For the majority of people, they will start off their employment through HR Consultancy with a Week 1 coding having submitted a Starter Checklist. Upon your enrolment onto our payroll system your details will be sent to HMRC. We will then receive an updated tax code within a typical 7 / 8 week period.
Question: If I miss the timesheet deadline in one week, and have two timesheets processed the following week, will I pay more tax?
Answer: This will depend upon your existing tax code and whether you are on a Week 1 basis or not. If you are then it is likely that you will be taxed at a higher rate in the short term as the system will calculate that the “double week” is indicative of your annual salary. For this reason, we do recommend that you ensure you submit your timesheet on a weekly basis to prevent this from happening.
Question: In the above scenario – how do I go about receiving back any overpaid tax.
Answer: If you are on a Wk1 tax code this will not happen until your Year to Date figures have been updated to HR Consultancy from HMRC by means of a cumulative tax code. This will then enable us to input your earning and tax paid for the tax year so far into the payroll system and this will calculate your earnings and tax in line to the point of the tax year.
If you are on a cumulative tax code (not Wk1) then when the next payroll is processed the payroll system will take into account what your earnings and tax paid in line to the point of the tax year and it will calculate the tax to the correct level.
Question: What are tax codes and how do they work?
Answer: Tax codes are allocated to workers to ensure that income tax is deducted at the correct rate. The government detail the standard tax code in the budget in April. There is one tax code issued which is for use, however individuals may have different circumstances in their working lives and therefore an amendment to that code may apply. Tax code alterations happen on a one to one level and this is dealt with directly between HMRC and the individual. Employers will be notified of any changes by means of a P6 document emailed directly from HMRC and will follow instructions detailed.