Why Is There No Tax Deduction On Your First Payslip?

If you are wondering why there is no tax deduction on your first payslip, you will find the answer to your question in the following blog post. In addition to this, we will also discuss the advisable steps for an employee to follow when they find out that there is no tax deduction on their payslip; as well as explore the potential consequences of not paying tax when it is due.

Why Is There No Tax Deduction On Your First Payslip?

If there is no tax deduction on your first payslip, it could be due to any of the following reasons:

• your annual income is less than the Personal Allowance threshold
• you have not been paid for an entire month
• you have not been assigned a tax code by HMRC

In the first case, if your annual income is less than the tax-free Personal Allowance of £12,570, you will have no tax liability. Therefore there will be no income tax deduction from your salary. This also means that there will be no deduction from your income or the mention of a tax code on your payslip.

The tax-free amount of Personal Allowance is set by the UK Government each year to allow taxpayers to benefit from tax relief and be able to bear the cost of living expenses. The Personal Allowance amount for 2023/24 has been set at £12,570. This means that if your annual income is less than this amount, your income will not be taxed and therefore not be mentioned on your payslip.

In the second case, if you’ve started working in the middle of a month and have only been paid for a few days (and not the entire month), there will be no income tax deduction on your first payslip. However, once you start earning a full month’s pay from the second month onwards, you can expect to have your income taxed and this deduction mentioned on your payslip. 

In this case, the additional days from your first month of employment are usually added to the second month’s calculation as well. 

While the third case is usually rare; however, it is possible that the HMRC still needs to finalise your tax code and therefore your employer needs a tax code to assign your income for a tax deduction. Therefore, this could be a potential reason why you have not paid tax on your first payslip.

What Should You Do If There Is No Tax Deduction On Your Payslip?

If you believe that there is no justifiable reason why there is no tax deduction on your payslip, you should first contact the HR department at your place of employment and inquire about the missing tax deduction on your first payslip. 

This is an advisable course of action so that if there is an error, it can be corrected at the earliest and you do not end up paying a larger and unplanned sum of tax in the following months.

If you are still waiting for a satisfactory answer from the HR department or your employer regarding the reason(s) why you have not been taxed on your first payslip, you should get in touch with HMRC and seek advice regarding your situation. 

Calls can be made to HMRC at 0300 200 3300, from Monday to Friday, between 8 am and 6 pm. Alternatively, you use your Personal Tax Account or HMRC’s online chat service to contact an HMRC official and seek guidance regarding your situation.

What Are The Consequences Of Not Paying Taxes?

The consequences of not paying taxes depend on whether the incident was intentional or due to an error. Additionally, the repercussions, in this case, will vary depending on whether the employer or employee is responsible for not paying taxes.

If your employer fails to pay your tax, HMRC will undertake an investigation to determine whether or not the employer was at fault or if an honest mistake was made. If it is found that the employer was at fault, they will be required to repay the unpaid tax along with interest. 

On the other hand, if a genuine error was made by the employer, HMRC may waive any penalties and provide the option to pay back the unpaid tax in instalments.

If your employer refuses to pay, HMRC may take enforcement action, such as legal proceedings and issuing of fines or penalties. HMRC may also request that you pay the tax liabilities yourself. However, you are likely to receive a reimbursement from your employer once the matter is resolved.

If a registered taxpayer (an employee) is responsible for not paying taxes and found guilty of tax evasion, they may face severe consequences including fines up to £5,000 and imprisonment for up to six months. In more severe cases, one could face up to seven years in prison and unlimited fines.

Conclusion:

The above discussion helps to conclude that if there is no tax deduction on your first payslip, there could be many reasons for this; such as an income lesser than the Personal Allowance. However, if there is no explanation for not having a tax deduction on your first payslip, it is recommended that you discuss the matter with your employer so that you don’t have to pay a higher amount of tax in the future.

References:

First payslip – no tax! Why? — MoneySavingExpert Forum

Paying tax in the UK | Students – UCL – University College London

No tax deduction on the first payslip at a new job: r/UKPersonalFinance

The first salary in the UK not being taxed – Personal Finance & Money Stack Exchange