Why is my pay different this month?

The usual reasons your pay changes

Start with this list. Most changes have one of these causes:

• A bonus or overtime this month. More of it seems to go in deductions than usual. It usually evens out over the year. See an example.
• A new or changed tax code. Check the code on this payslip against last month's. What a code change does.
• An emergency tax code after a job change, such as 1257L W1, 1257L M1, 1257L X or 0T. This is common in a new job and is usually put right once HMRC has your details.
• A second job on a BR code, taxed at 20% on all of it. Why that happens.
• An extra payday if you are paid every week, every 2 weeks or every 4 weeks. How that works.
• Your first or last payslip, which may cover part of a month, include holiday pay or catch up on missed pay.
• A change in a deduction, such as a pension, salary sacrifice, union fees or a student loan starting.

A normal month and a bonus month

Income Tax is worked out on your pay so far this tax year, so it keeps track and evens out. National Insurance and student loan repayments are different: each payday is worked out on its own. So a month with a bonus or overtime looks heavily taxed, even when your pay for the whole year has hardly changed.

Here is someone on £28,000 a year, paid monthly, repaying a Plan 2 student loan, who gets a £1,500 bonus in one month:

Of the £1,500 bonus, £956 reaches this person's account. The Income Tax on it is 20%, the same as on the rest of their pay. What surprises people is the student loan: normally they repay nothing, because £2,333.33 is under the monthly threshold of £2,448.75. In the bonus month the whole amount over the threshold is repaid at 9%, £124.00, although on £29,500 for the whole year they would owe only £10.35. Repayments made when your yearly income was under the threshold can be claimed back from the Student Loans Company after the tax year ends.

Overtime works the same way. It is not taxed at a higher rate; it is added to that month's pay. Use the bonus tax calculator or the overtime calculator to see your own figures.

A new or emergency tax code

Your tax code tells your employer how much of your pay is tax-free. The usual code, 1257L, gives £12,570 a year. If the code on your payslip has changed, your tax changes with it. A smaller number means less tax-free pay, often because HMRC is collecting tax on a company benefit or on tax underpaid in an earlier year.

An emergency tax code is a temporary code used when HMRC doesn't yet have your details, often in a new job without a P45. Codes ending in W1, M1 or X work out each payday on its own, and 0T gives no tax-free pay at all. On £28,000 a year, a 0T code takes £466.67 of Income Tax a month, against £257.17 with 1257L: £209.50 more. Emergency codes are common and usually put right once HMRC has your details. Any extra tax taken is normally paid back through your wages, or you can claim it.

To see what your own code means, use the tax code checker or read what your tax code means.

A second job

Your tax-free allowance can only be used once. It usually goes on your main job, so a second job is taxed from the first pound, often on a BR code: 20% on all of it. That is normal and not a mistake. It goes wrong when the allowance is put on the smaller job, so the main job is taxed far more than usual. If that has happened, ask HMRC to move it to the job that pays more. The two jobs tax calculator shows what each job should take.

An extra payday

If you are paid every 4 weeks, there are 13 paydays in a year rather than 12, and now and then a tax year has 14. If you are paid weekly or every 2 weeks, some tax years have 53 or 27 paydays. In those years one payslip can look different, because the tax-free allowance and thresholds are spread across more paydays. It is not a mistake, and it usually evens out by the end of the tax year.

Differences of a few pence

Payroll works in whole pounds and its own tables, so a payslip can differ from an exact calculation by a few pence or a pound or two a month. That is rounding, not a mistake.

Who to ask

If your hours, pay rate, overtime or a deduction look wrong, ask your employer's payroll team: they set those. If your tax code looks wrong, HMRC sets it, not your employer. Check it in the HMRC app or your personal tax account on GOV.UK, which also shows why the code is what it is. Have your latest payslip and your P45 or P60 to hand.

If you have paid too much tax, HMRC will pay it back, usually through your pay or after the tax year ends. You don't need a company to claim it for you.

Bottom line

Most changes in pay have an ordinary reason: a bonus or overtime, a change of tax code or an extra payday. If yours doesn't fit any of these, ask your payroll team about your pay and HMRC about your tax code. Overpaid tax is paid back, and you don't need a company to claim it for you.

Tips

• Compare like with like: a normal month against a normal month, not one with a bonus, overtime or a first or last payslip.
• Look at the "year to date" figures on your payslip. Over a whole tax year, Income Tax should come out close to a yearly calculation.
• Keep your P60 each year and your P45 when you leave a job: they show your total pay and tax, which is what HMRC checks.
• Be wary of texts or emails offering a "tax rebate". HMRC never asks for bank details that way, and you can check what you are owed yourself on GOV.UK.

This guide explains the rules; it is not personal financial advice.

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