Question: I just started working in the UK for the first time and received my first payslip. Another colleague of mine got his second payslip here, from the same company.

We were surprised that in the detail no amount for "Tax" was deducted.

I researched a bit and found that for the tax code [1060L](http://taxaid.org.uk/guides/information/issues-for-employees/employee/form-p46), specified in our payslip, we got some tax free income for a while.

However, since I'm not an English native speaker, I still have some doubts on how it works.

As I understand it:

* I am entitled to 10600£ per year tax free and until I reach that value, I won't pay tax;
* When I do reach 10600£, taxes will be deducted as for everybody else;

Is this correct?

Answer: 
This answer is a conclusion of a discussion in [chat](http://chat.stackexchange.com/rooms/30863/discussion-between-james-webster-and-andyt)

Your income and tax will look like this:

[![enter image description here](https://i.stack.imgur.com/EgXZv.png)](https://i.stack.imgur.com/EgXZv.png)

You also asked about a monthly salary of 3750. 
[![enter image description here](https://i.stack.imgur.com/KlhsF.png)](https://i.stack.imgur.com/KlhsF.png)

* I used Excel for this and assumed 20% tax, even though some of it might fall into the 40% tax bracket.
* I assumed the tax free allowance next year will remain £10600

Assuming you are paid monthly and you started work in October, this year, you will have   
`(10600 / 6) = 1766.66` per month tax free. That means you'll have to be earning £1766 per month before you pay tax.

Your colleague will be working 7 months this tax year. They will have to earn more than   
`10600 / 7 = 1514.29` before they pay tax.
CORRECT ANSWER FOUND!

I'm new to the UK and also started work in September 2015. It also drove me insane I had such a hard time understanding how the taxes worked. After a lot of research, I came upon this thread, and read the whole thing, including the bits in the chat where James, you posted the final excel table.

Then I actually realised HMRC gave a pretty useful tool for tax calculations for a given pay date anytime during a given tax year. There it is: [tax calculations](http://tools.hmrc.gov.uk/hmrctaxcalculator/investigate/Personal+Tax+Calculator/en-GB/Attribute~b3%40Rules_GlobalProceduralRules_doc~global~global/qs%24s54%40Interviews_Screens_xint%24global%24global?user=guest)

And I'm happy to say: the final table was correct! Chiapa, you can check for yourself with this tool. 

To sum up, your taxes are calculated as followed (if you're taxed 20% and allowance is 10,600 per tax year, or 883 per month):

* **cumulative income tax = 0.2\*(income cumulative- tax free cumulative)**
* **income tax paid on month (n) = cumulative income tax on month (n) - cumulative income tax on month (n-1)**

:)