# Tier 2 Immigrants and taxes



## zekina (Oct 26, 2010)

Hi!
Could you please help me in defining the tax system for Tier 2 immigrants.
A person is coming to UK from Ukraine as Tier 2 immigrant, how much has she/he pay annually?
The second question is: are the taxes from allowances for accommodation also paid or they are just allowances and no tax is paid for them?


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## Bevdeforges (Nov 16, 2007)

I'm moving this into a thread of its own to try and attract a bit more attention.

As far as I know, any employer-paid allowances for relocation, accommodation or whatever else are included in your "salary" for taxation purposes - but if that's wrong I'm sure someone will come along soon and correct me.
Cheers,
Bev


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## Joppa (Sep 7, 2009)

zekina said:


> Hi!
> Could you please help me in defining the tax system for Tier 2 immigrants.
> A person is coming to UK from Ukraine as Tier 2 immigrant, how much has she/he pay annually?
> The second question is: are the taxes from allowances for accommodation also paid or they are just allowances and no tax is paid for them?


Basically there is no difference to tax rates between recent arrivals and long-term residents. You are allowed the first £6,475 tax-free, and the rest is taxed at 20% until £37,400. 40% above that to £150k, and 50% above that. Plus you have to pay National Insurance contribution at 11% above £5,720 (slightly less if belonging to employer's pension scheme). Easiest to use online tax calculator such as UK PAYE Income Tax Calculator 2010 salary calculator UK. Updated for 2010 / 2011 tax year. Calculate wages pension national insurance and student loan repayments online.
Often for the first pay packet, new arrival is taxed at basic rate (20%) for all their earnings without personal allowance, but it will be put right in subsequent payments by completing a form like P46. If you start work mid-way through the tax year (April to April), you pay slightly less tax in first year as you still get full allowance for that year.

Any accommodation allowance paid by the employer is fully taxable (bar a few exceptions, like a caretaker is given free accommodation in an attached cottage). It will usually be paid with the tax already deducted (net).


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## zekina (Oct 26, 2010)

Thank you very much! Really appreciate this.



Bevdeforges said:


> I'm moving this into a thread of its own to try and attract a bit more attention.
> 
> As far as I know, any employer-paid allowances for relocation, accommodation or whatever else are included in your "salary" for taxation purposes - but if that's wrong I'm sure someone will come along soon and correct me.
> Cheers,
> Bev


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## ukyankee (Oct 24, 2010)

Joppa,

Hi, I recently moved to the UK and my 1st paycheck was 8731. I was taxed 1,098 on this amount. That's 12.5%. According to what you said, I should have been taxed on 2256 (8731-6475) * .20 = 451 instead of 1,098. Does this sound right? I don't have a national insurance number yet, so maybe that's why this occurred and it'll be fixed later. What do you think?


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## Joppa (Sep 7, 2009)

ukyankee said:


> Joppa,
> 
> Hi, I recently moved to the UK and my 1st paycheck was 8731. I was taxed 1,098 on this amount. That's 12.5%. According to what you said, I should have been taxed on 2256 (8731-6475) * .20 = 451 instead of 1,098. Does this sound right? I don't have a national insurance number yet, so maybe that's why this occurred and it'll be fixed later. What do you think?


The way tax is deducted from your gross pay is something like this:
Your annual personal allowance is divided by 12 and deducted from your monthly pay. The balance is taxed at 20% and 40% (what happens is you are taxed at 20% until your taxable pay to date reaches £37,400, when 40% is deducted until your pay reaches £150k, and then 50%). But if you start work for the first time (i.e. your first job since the start of the tax year on 6th April 2010), £6475 is divided by the remaining number of months in the tax year and deducted each month before tax is taken. Remember you start to lose your personal allowance once your annual pay reaches £100k, at the rate of £1 for every £2 you earn above that.
So supposing you were paid £8731 gross in September, £6475 was divided by 7 (the remaining number of months in the current tax year) and deducted from your gross pay. But what often happens is that you aren't given any personal allwance for the first month and the whole of your pay is taxed at the basic rate (20%). I don't know how £1098 was arrived at, but I guess that the pay covered more than a month, or there were further tax-free deductions from your pay, such as pension contributions and allowable expenses. But the general principle is as I've described.
Normally you don't need to worry as any over- or underpayment will be corrected over the next month or so as you are assigned the correct tax code by the tax office, which tells your employer how much to deduct for tax.


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## ukyankee (Oct 24, 2010)

Joppa said:


> The way tax is deducted from your gross pay is something like this:
> Your annual personal allowance is divided by 12 and deducted from your monthly pay. The balance is taxed at 20% and 40% (what happens is you are taxed at 20% until your taxable pay to date reaches £37,400, when 40% is deducted until your pay reaches £150k, and then 50%). But if you start work for the first time (i.e. your first job since the start of the tax year on 6th April 2010), £6475 is divided by the remaining number of months in the tax year and deducted each month before tax is taken. Remember you start to lose your personal allowance once your annual pay reaches £100k, at the rate of £1 for every £2 you earn above that.
> So supposing you were paid £8731 gross in September, £6475 was divided by 7 (the remaining number of months in the current tax year) and deducted from your gross pay. But what often happens is that you aren't given any personal allwance for the first month and the whole of your pay is taxed at the basic rate (20%). I don't know how £1098 was arrived at, but I guess that the pay covered more than a month, or there were further tax-free deductions from your pay, such as pension contributions and allowable expenses. But the general principle is as I've described.
> Normally you don't need to worry as any over- or underpayment will be corrected over the next month or so as you are assigned the correct tax code by the tax office, which tells your employer how much to deduct for tax.


wow, wasnt expecting such a quick response, thx for the response! I love this forum


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## ukyankee (Oct 24, 2010)

Joppa said:


> The way tax is deducted from your gross pay is something like this:
> Your annual personal allowance is divided by 12 and deducted from your monthly pay. The balance is taxed at 20% and 40% (what happens is you are taxed at 20% until your taxable pay to date reaches £37,400, when 40% is deducted until your pay reaches £150k, and then 50%). But if you start work for the first time (i.e. your first job since the start of the tax year on 6th April 2010), £6475 is divided by the remaining number of months in the tax year and deducted each month before tax is taken. Remember you start to lose your personal allowance once your annual pay reaches £100k, at the rate of £1 for every £2 you earn above that.
> So supposing you were paid £8731 gross in September, £6475 was divided by 7 (the remaining number of months in the current tax year) and deducted from your gross pay. But what often happens is that you aren't given any personal allwance for the first month and the whole of your pay is taxed at the basic rate (20%). I don't know how £1098 was arrived at, but I guess that the pay covered more than a month, or there were further tax-free deductions from your pay, such as pension contributions and allowable expenses. But the general principle is as I've described.
> Normally you don't need to worry as any over- or underpayment will be corrected over the next month or so as you are assigned the correct tax code by the tax office, which tells your employer how much to deduct for tax.


I had only worked in the UK 10 days when my 1st paycheck was received, but it did include a one-off 5,000GBP relocation allowance, a monthly car allowance and a monthly fixed payment in addition to my base salary.


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## Joppa (Sep 7, 2009)

ukyankee said:


> I had only worked in the UK 10 days when my 1st paycheck was received, but it did include a one-off 5,000GBP relocation allowance, a monthly car allowance and a monthly fixed payment in addition to my base salary.


Relocation allowance up to £8500 is tax free. Car allowance is taxable, but the exact mechanism depends on a number of factors.
Ask your company accountant to explain it all!


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## Bevdeforges (Nov 16, 2007)

To clarify a bit, the tax withholdings are based on your estimated "annualized" income - so getting an allowance or other "bonus" payment in a lump sum can complicate (and temporarily skew) the withholdings, particularly on your first paycheck.

The other factor to take into account is whether you're on the "local payroll" or the "expat payroll." On the expat payroll, there are often such goodies as "tax equalization" that may be lumped in with the calculations to assure that enough income tax is withheld to assure no big surprises at year end.

As Joppa suggests, you probably should go through your payslip with your employer's accountant or payroll department.
Cheers,
Bev


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