People keep telling me I am allowed to earn £8105 before i start paying tax this year, I have just recieved my tax code for the year and it says I have a tax free amount of £4276 can you please explain what this means in simple terms,cause as far as i can see I do not get £8150 before I start paying tax.Are people confusing Personal allowance with tax free amount is this what I am allowed to earn before I start paying tax, please advise, or have i Just answered my own question ????.L E. Lewis
Province/Country relating to question: England
From 6th April 2012 the first £8105 of your gross income will be free of tax ie your personal tax allowance. Any income over this will be taxable.
If you are in receipt of other income as well as your earnings eg state pension, company benefits in kind, gross bank interest etc a deduction is often made from your personal allowance to arrive at your tax code used against your employment.
Have you been sent a coding notice by HMRC to show how your tax code has been calculated to arrive at £4276 eg 427L ?
I have recieved a codeing notice, I am trying to understand why am i paying tax they have told me how they arrive at my tax code I earn about 9000 a year all i want to know is do i actually get 8150 out of the 9000 that i earn
Yes - provided you do not receive any other income £8105 will be tax free and £895 will be taxed at 20% = £179
35+ years experience in income tax, CGT, non-residence