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.
Your payslip should not show tax deductions until you have fully utilised your cumulative personal allowance for the tax year, if you started working somewhere in the middle of the tax year.
example,
Starting date: 01/01/2016
Salary: 2500

Income tax = 20%( £2500 - £7947(883 \*9) ) = 0

£7947 is cumulative personal allowance for 9 months from April, 2015 to Dec, 2015. 

This employee will not pay tax for the entire tax year of 2015/2016 as his total income is only £7500 (3\*£2500), which is below the personal allowance. 
Assume tax has been deducted by mistake from his income, it will be rebated later on. 

Correct me if I made any mistake.