Feel like you are paying too much tax on your Christmas job?

The Christmas season often brings a flurry of job opportunities, which can be a great way to earn some extra money. But starting a new job can also mean having to deal with the odd challenge! In this article, we look at some common issues you might encounter around your pay and taxes when you take on a seasonal job and offer some tips on how to address them.

What should happen when you start a new job

If you are an employee, your employer is required to deduct income tax and National Insurance contributions from your wages under the Pay As You Earn system. Your employer calculates the amount of income tax to deduct by using a tax code.

If you have recently started a new Christmas job then it is important to make sure your employer is using the right tax code for you. There are two options that can help ensure you are on the right tax code from the beginning:

• you should give your new employer your P45 if you have one, as this will allow them to see your previous pay and tax figures and to implement the same tax code you had in your previous job; or
• If you do not have a P45, then you should complete a Starter Checklist before your first pay day, so that your new employer can pay you without your exact tax code in place. They will instead use an estimated tax code based on the answers you give in the Starter Checklist. For many people this will actually produce the right result, so your employer may use the tax code generated by the Starter Checklist on an ongoing basis.

There is guidance on the Starter Checklist, including examples on how to complete it in different scenarios, as well as what happens if the estimated tax code it produces isn’t quite right, on our page about the Starter Checklist.

Is your tax code wrong?

Sometimes, even if you think you’ve done everything correctly, you can be placed on an unexpected tax code. You may be taxed at a higher tax rate than usual, meaning your take home pay is lower. This may be frustrating; however this is only usually temporary as HMRC will refund you if you have paid more tax than was due. 

This refund should either happen:

• during the tax year through the payroll once HMRC have corrected the tax code; or
• after the end of the tax year, when HMRC does a final check to see how much pay you have received and how much tax you have paid.

Based on our experience, there are a handful of typical reasons for your tax code might be different than expected. Have a look down the list below and see if any might be relevant. 

Your P45 is too old 

If you gave your new employer your P45 from your last job, but it is from a previous tax year, then it cannot be used by your new employer. This is because it relates to a job that you left before 6 April 2024 so the information on it will not be relevant for your current year tax situation.

In this situation, you should complete a Starter Checklist, otherwise your employer must operate an 0T code for you first payment. This is a code that does not give you any personal allowances and that HMRC use where they do not have enough information to issue a proper code.

Your Starter Checklist was late

If your employer’s payroll department didn’t receive your Starter Checklist in time, they must operate an 0T code for your first pay packet. This is a code that does not give you any personal allowances and is used where HMRC do not have enough information to issue a proper code.

If you are in this situation, you should check with the payroll department that they now have the Starter Checklist and will adjust your tax code for the next time you are paid. If you are worried that the Starter Checklist might have got lost, complete another one straight away and give it to the payroll department. 

HMRC think you have another job

If you still have a ‘live’ employment record in HMRC’s systems, then HMRC will tell your new employer to operate a basic rate or BR code (20% flat rate tax) as if your new job is a second job. This can happen if you have only just left a job very recently or you are still on the books of an agency – even if you have indicated in your Starter Checklist that you only have one job!

If the Christmas job is now your only job, you can request a P45 from your old employer or agency, which should prompt them to mark you as a ‘leaver’ in their next payroll submission to HMRC. This should update HMRC’s systems and mean that your tax code is corrected. Alternatively, you can contact HMRC and ask that they mark your new job as your main employment on their system. 

You DO have another job

If you have taken on a Christmas job in addition to another employment, you should let your second (Christmas) employer know by ticking the correct box on your Starter Checklist. In this case, your second employer will use a BR tax code and income tax will be collected at 20%.

If you earn more than your tax free personal allowance in your other job, then this should usually produce the correct result. However, if you earn less than the personal allowance in your other job, then you might wish to ask HMRC to split your personal allowance between your two jobs. You can read more about this on our page Multiple jobs.

Your code is collecting tax on other income or tax debt

HMRC can use your tax code to collect tax on other sources of income or benefits in kind from your job, or to collect old debts you might have with HMRC. The amounts included in your tax code may be correct, but it is a good idea to check that you agree. You can read more about checking your tax code in our article Check your PAYE code carefully.

If the adjustment to your tax code relates to an old HMRC debt, but the drop in your pay is causing you hardship, you can ask HMRC to collect the debt another way. We also sometimes hear of HMRC adjusting tax codes to collect late filing penalties for outstanding tax returns. In some cases, it can be possible to ask HMRC cancel unnecessary tax returns, which will remove the penalties and restore the tax code to normal. You can read some specific guidance that we developed to help people facing these issues here. 

Other reasons your take home pay might be lower

Sometimes your take-home pay may be lower for a different reason, not connected to your tax code.

National Insurance contributions (NIC) 

Don’t forget that in addition to tax, employers can make other deductions from your pay. The main one is NIC, which works differently to tax. 

Pension deductions

If you are in a seasonal job, your employer might still auto-enrol you into workplace pension (even though strictly they may not have to). If they do this and you do not opt out, then your will employer will probably take a contribution out of your pay. 

Student loan deductions

Although your job is seasonal, you may still be required to make student loan repayments if your income is high enough to meet the thresholds. Even if you have forgotten to indicate that you have a student loan on the Starter Checklist, HMRC can inform your new employer to start making deductions from your pay based on their own records. 

You work through an umbrella company

If you work through an umbrella company, things can get quite complex – so much so, that people might think they are being ’scammed’ by an umbrella company when they get their first payslip. This is usually not the case. We explain how things should work in our website guidance and point you to a GOV.UK tool that can help you check your pay and tax position in our recent article. 

Attachment of earnings orders 

Sometimes your pay can go down because your employer has been ordered to make deductions from your pay to satisfy a non-HMRC debt or fine that you have, or to recover overpaid benefits. More information is available on GOV.UK. 

If you employer receives an order, they must comply with it – they may be fined or prosecuted if they do not. If you will suffer hardship because of the deductions, you should talk to an experienced adviser at Citizens Advice or other welfare organisation who can help with money and debt, explore your options and help you understand your rights.

Further help

If you are still concerned that your take home pay doesn’t look right and aren’t sure why, or what to do next, you might need to speak to your employer or contact HMRC.

You also might be able to get help from the charity TaxAid. They can provide free assistance to people who are on lower incomes, which can include accessing specialist advisers at HMRC and dealing with them on your behalf.