Salary underpayment and Tax paid on it!!

cheekymole · 25 April 2012 at 8:12AM

Hi All,

I'm thinking that they've taxed way too much but can someone help please.

I've been underpaid since September 2008 and therefore being repaid just over approx £13,500.

My pay slip for this month is showing total income of £17200 which includes this months pay and some OT. Outgoings are Pension £650 NI £600 and tax £6500 lkeaving me with just over 10k.
Surely this can't be right, can it? Why have I paid so much tax? :mad:

molerat · 25 April 2012 at 8:51AM

M1(April) is the worst time to get large underpayments back. The system works on 1/12ths of your allowance per month on a cumulative basis and has assumed this is your normal payment which means your annual pay would be £206400 and taxed you accordingly. It will correct itself as the year goes on by paying less tax monthly than normal.

cheekymole · 25 April 2012 at 8:59AM

Thanks for that, I wish it was my normal payment!!

Is there any way of claiming it back sooner or do I just have to live with the system?

molerat · 25 April 2012 at 9:21AM

You could phone up your tax office and ask them although in my experience they will mess up the refund and you will end up with an underpayment of tax carried forward into next FY.

John_Pierpoint · 25 April 2012 at 9:24AM

cheekymole wrote: »

Hi All,

I'm thinking that they've taxed way too much but can someone help please.

I've been underpaid since September 2008 and therefore being repaid just over approx £13,500.

My pay slip for this month is showing total income of £17200 which includes this months pay and some OT. Outgoings are Pension £650 NI £600 and tax £6500 lkeaving me with just over 10k.
Surely this can't be right, can it? Why have I paid so much tax? :mad:

This month (April) isn't over yet - do you normally get paid this early?

Will your total for the year give you problems with other "cliff edges" and increased rates - child support etc. ?

[I am sure I have seen threads on here, where similar situations have involved mitigation to avoid such unwanted effects - pity you did not have half paid in March ?]

cheekymole · 25 April 2012 at 9:27AM

I am paid on 25th of each month.

There won't be any other issues as we don't get tax credits etc or pay/receive child support.

Just annoyed that did get the expected amoutn but I suppose as long as I get it eventually. It was money I wasn't expecting so it's not missed although I do think my employer should be paying 4 years worth of interest on it

Mikeyorks · 25 April 2012 at 12:05PM

cheekymole wrote: »

I've been underpaid since September 2008 and therefore being repaid just over approx £13,500.
My pay slip for this month is showing total income of £17200 which includes this months pay and some OT.

If the normal monthly pay (£17200 - £13500 = £3700) is approaching 'typical' (I know it includes OT, hence the question) - then the extra £13500 is likely to push you over the 40% limit for the whole year? The limit being £42475.

If that is the case then it's possible you could approach HMRC and ask they allocate the money to the appropriate years. For this to happen - it's first of all to be beneficial. No point in re-apportioning if you were at 40% for 08-09 onwards? Or won't hit 40% this year - with the £13500 included?

But the crucial test is when you were 'entitled' to the arrears? If this is some sort of regrading then it's likely the date of the regrading creates the 'entitlement' ..... and it will be correctly taxable when paid. But if these are genuine (and few are) arrears of pay and the entitlement stretches back to Sept 08 ..... then it may be beneficial to ask for a re-apportionment.

Basic detail here :

http://www.hmrc.gov.uk/manuals/pommanual/PAYE70023.htm

- the penultimate para is the applicable one.

cheekymole · 25 April 2012 at 2:50PM

Thank you!
Normal monthly pay is approx 3,500 gross 2,800 net, would you suggest I approach HMRC in this case?

The extra pay was payable from September 2008 due to an extra qualification. It had never been added to my pay and was only noticed when employer started using oracle electronic payment system

ceeforcat · 25 April 2012 at 4:20PM

May should address the balance somewhat as the 'system' will be assuming an annual salary of £124200 by that stage and you will get the difference as a result of the amount which was taxed at 50% which will now be taxed at 40%.

Mikeyorks · 25 April 2012 at 4:48PM

cheekymole wrote: »

Normal monthly pay is approx 3,500 gross 2,800 net, would you suggest I approach HMRC in this case?

So that's £42k gross - which is hitting the 40% border. So it is definitely worth it for this year as the arrears will virtually all be taxed at 40%. But is it worth retrospectively adding it to the years it relates to? If the £3500 includes the new award - then it almost certainly is? But worth a check that you've got headroom to the 40% level in the applicable years?

The extra pay was payable from September 2008 due to an extra qualification. It had never been added to my pay ..

Seems a fairly clear cut case of 'employer payroll error' - to quote HMRC. Therefore the 'entitlement' arose from 2008. So you should have no problem getting HMRC to re-apportion it via the link I gave above.

Salary underpayment and Tax paid on it!!

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