Noobie Question RE Tax Offset and P60

[DJorgio]

Hi Everyone,

Sorry if this sounds like a real silly question but i have never been good with the accounting side of things.

Basically, ive had a contract since November last year and i claim a fair bit of mileage and other job related expenses, also since ive started ive not had to pay tax because these expenses have exceeded what my tax pay should be so my payslip has always shown Tax £0.00

So my question is this, if let say i was surppose to pay £100.00 in tax and my offset expenses come to £200.00 my tax pay is reduced to £0.00

So where does the other £100.00 go ?

Again sorry of this is a odd question but when i received my P60 today i expected it to say i had paid lots of tax but infact it says ive paid £0.00 tax (even though ive only been contracting since November and before then i was out of work for some time)

So my figures are produced as such

In previous employment £285.60
In this employment £2,373.59
Total for year £2659.19

Tax deducted is all £0.00

Final Tax Code is 522L

Does this sound right ?

Thanks in advance for any advice, my umbrella company just baffles me with science and i ws hoping to get a heads up before speaking to them.

Cheers
Steve

[moorfield]

Total for year £2659.19

If that's all you earned in 2007/08 then no tax because you are within your personal allowance - indicated by your tax code 522L ie first £5220 is tax free.

Have you recently been travelling or something ?

Edit: ah, I see you say you were out of work - that explains it.

[Archangel]

So you've been earning approx £500 per month gross since November after expenses?

If so then the above response is correct (first £5220 in the tax year is tax free)

If not, where has the rest of the money gone? (I hope those expenses claims are legit!)

[DJorgio]

Thanks for the replies guys, yes i have only earned that from apr 07 to apr 08 as i was out of work for some time, so that explains why i have not been charged tax, but i had a load of tax offsetting expenses, mileage mostly but a few other "legitimate expenses", where does that money go ? if it has not been used to offset my tax as that's still at £0.00 then where does it go ? does my umbrella company keep these or do they simply dissolve or something, i was expecting my P60 to show these tax offsetting figures, ie tax to day -£100.00 rather than £0.00 ?

Appreciate any comments

Steve

[VectraMan]

Expenses don't offset tax, they offset the taxable pay.

If you earn £5K with £2K expenses, the umbrella will first pay you £2K to refund expenses (expenses are not income because they're meant to be neutral). That leaves £3K which is your taxable income (but at 0% as it's below the threshold).

If you've earned less than your expenses, there's no money to pay you all the expenses so the umbrella should be keeping that on their books to pay you later (assuming you start earning).

A bit difficult to get your head around for sure.

[DJorgio]

Expenses don't offset tax, they offset the taxable pay.

If you earn £5K with £2K expenses, the umbrella will first pay you £2K to refund expenses (expenses are not income because they're meant to be neutral). That leaves £3K which is your taxable income (but at 0% as it's below the threshold).

If you've earned less than your expenses, there's no money to pay you all the expenses so the umbrella should be keeping that on their books to pay you later (assuming you start earning).

A bit difficult to get your head around for sure.

Indeed, but thanks for this, it does explain a few things.

Cheers
Steve