Payroll Question General

JamesB
JamesB Registered Posts: 51 ? ? ?
Not RTI related for once!!
Not coming from a payroll background I have a lot to learn...this question should be simple to answer!!

A nanny is employed under PAYE full time to receive £995 NET pay per month.

6 months into the tax year she realises the employers have not been paying the tax due to hmrc and supplying her with payslips, so she has left after 6 months.

She has asked me to try and calculate the tax/ni due to hmrc as she wants to report them.

Do i calculate the tax based on the pro rata gross pay (say £14k gross pa £12k net) or because she only worked for 6 months and earned say £6k net no tax will be liable as it is under the threshold?

I am pretty sure it is the first option but wanted to check!
Hope that makes sense and thanks in advance.
J

Comments

  • BIG WAL
    BIG WAL Registered Posts: 133 ? ? ?
    Why would it be necessary to calculate the Tax & NI ? It's the employers responsibility to account to
    HMRC for that and pay them - not the employee's. So she can just tell HMRC the amount she was paid, which is above the Tax/NI threshold and that she has reason to believe because she didn't get a payslip no deductions were made or paid to HMRC. Then leave it to them.

    That no payslips were supplied doesn't prove deductions weren't made or paid. If it turns out they
    weren't she can't be held liable anyway, as it's the employer's liability.
  • JamesB
    JamesB Registered Posts: 51 ? ? ?
    Thanks BW I understand what you are saying completely. The employers have admitted they have not paid any tax and the nanny just wanted to know how much they owed.

    I suppose what I want to know is (and this is for future ref as well):

    At the start of the tax year should the employers have started deducting tax and NI on the assumption she would be employed for the whole tax year so tax and NI would be due. So say £1200 tax would have been payable per annum £100 gets deducted each month.

    Or do you have the choice to not deduct this until you go over the threshold? So affectively the employee gets the same gross and net pay for the first few months of the year then gets deducted tax and NI as and when they go over the threshold?

    Because this nanny would have had to pay tax/ni if she worked the whole year, but subsequently left having only earned £6k up to departure, can the employers argue no tax/ni is due because she is not over the threshold?

    Sorry I am reading this back and know I am sounding ridiculously stupid :blushing:
  • omega man
    omega man Registered Posts: 283
    I am studying sage payroll now and it is my understanding that she should have provided a p45, if no p45 then a p46 and say which statement is ok.
    It sounds to me like she should have been on BR tax or code 0T to force the employee to sort their tax affairs out.
    The employer should have phoned hmrc and i am sure this is what they would have advised.
  • coojee
    coojee Registered Posts: 794
    JamesB wrote: »
    Thanks BW I understand what you are saying completely. The employers have admitted they have not paid any tax and the nanny just wanted to know how much they owed.

    I suppose what I want to know is (and this is for future ref as well):

    At the start of the tax year should the employers have started deducting tax and NI on the assumption she would be employed for the whole tax year so tax and NI would be due. So say £1200 tax would have been payable per annum £100 gets deducted each month.

    Or do you have the choice to not deduct this until you go over the threshold? So affectively the employee gets the same gross and net pay for the first few months of the year then gets deducted tax and NI as and when they go over the threshold?

    Because this nanny would have had to pay tax/ni if she worked the whole year, but subsequently left having only earned £6k up to departure, can the employers argue no tax/ni is due because she is not over the threshold?

    Sorry I am reading this back and know I am sounding ridiculously stupid :blushing:

    For employees on a normal cumulative tax code their personal allowance is divided by 12 and each month they get 1/12 of their annual allowance against their pay. So if their pay is £1000 per month and their tax code is 9900, they would get 9900/12 = £825 allowed against their pay. Tax would only be payable on 1000-825 = 175 for that month. Next month they get 1650 allowed against their cumulative pay which will now be £2000, so they'd pay tax on 2000-1650 = 350 and the tax that was paid the previous month would be deducted.

    This only applies to PAYE, NI is a straight monthly allowance, it's about £640 a month I think, anything earned above that is subject to NI. It's not cumulative so if you earn £900 one month and none the next month you would pay NI the first month, not the second, and crucially, you wouldn't get a refund of what was paid the first month as you would under PAYE.

    This is PAYE and NI in a very small nutshell.

    In answer to your specific question, the nanny doesn't need to work out how much tax should have been paid as others have said, that's HMRC's job. As she only worked for 6 months of the year she'll be entitled to 6/12 of her personal allowance against what she earned. But if she doesn't work at all for the remaining 6 months of the year she would get some tax back but only at the end of the year once her full allowance is applied to the pay.

    I don't know how much of that makes sense, hopefully some of it.
  • payrollpro
    payrollpro Registered, FMAAT Posts: 427 Dedicated contributor ? ? ?
    If it was me I wouldnt bother working it out as it is clear she never got a P45 on leaving, how could she when they wont know what to put on it! Under regulation 72 it is the employers responsibility to assess the pay, calculate the appropriate PAYE and pay it across to HMRC at the appropriate time. Failure to do this is an abuse of the PAYE system and lands them with the liability for the PAYE unless they can register a reasonable excuse under R72.

    What she needs to do is report the matter to them, point out the problems with her tax and in particular NICs and ask that her records be put right accordingly. She could sue the employer because section 8 of the employment rights act 1996 gives her the right to a pay statement on or around the date of payment and failure to do that can be put to a tribunal for consideration, she wont get much but it would be very satisfying.

    Payrollpro
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