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.
Tax in the UK is handled on a monthly or weekly basis depending on how often you are paid, so your tax code means that for each month, you will get £10600/12 = £883 tax free and then the rest will be taxed. That means that normally people get about the same amount in each pay packet throughout the year, rather than initially paying no tax and then suddenly starting to pay tax

However, the allowance is actually an annual one for the entire tax year, from April 6th 2015 to April 5th 2016. So in your case if you haven't been working in the UK from April until you started this job, you get to "catch up" with all the allowance you haven't had so far. So in practice you'll get about £5300 of pay tax free and then will start paying tax at the usual monthly rate. That probably explains why you are paying very little tax in the initial months of your employment.