New Tax on owed pay!!!

NewbieMoneySaver**

Hello all,

I have been owed money for a few months now from my employer but the amount dates back to the last 20 months. I should have had it sorted at least three months ago as this is when the paperwork went through.

That would have been under the 08/09 tax bands and now it will be taxed under the 09/10 tax bands. What will this do to the amount. I worked it out to be roughly £1400 after the old tax amount.

What can I do about this?

Freddie_Snowbits

if you are paid this money this tax year, then you will pay tax on it this tax year. As the tax bamds have gone up, there is a slight benefit it getting the money now.

NewbieMoneySaver**

So what your saying is that I will actually get more now than I would have before?

jennifernil

Probably not for this particular payment, but overall the personal allowance has increased and the starting point for higher rate tax has increased too.

dzug1

With the shifting bands and no other info it's difficult to work out the exact effect, but be aware of:

If it takes you above the 40% threshold in the month it is paid you might pay more tax that month - but the excess would then be gradually paid back to you over the year.

You will probably be hit for extra NI in the month it's paid too - this you won't get back. Probably not a lot different from what you would have paid at the time though

John_Pierpoint

The above replies are assuming that you earned enough from work and savings last year to be in the standard rate 20% band for your marginal income in your 08/09 tax year..

I suppose they and you are assuming that you will earn more than your personal allowance for this 09/10 year too.

NewbieMoneySaver**

John_Pierpoint wrote: »

The above replies are assuming that you earned enough from work and savings last year to be in the standard rate 20% band for your marginal income in your 08/09 tax year..

I suppose they and you are assuming that you will earn more than your personal allowance for this 09/10 year too.

I did earn above the personal earnings then and for the future. The back dated pay is for promotion but like I said they have failed to sort out the pay side of things?

fengirl_2

The basic rate of tax for this year and last year (08-09) is 20%, so having the back pay paid this year will make no difference to your liability. The basic rate for 07-08 was 22%, so if any of the back pay relates to that year, you are better off. Also, as someone else has pointed out, the level for 40% tax has increased this year, so if that affects you, you are better off.
It does not matter whose fault it was that you have accrued this pay, pay is taxable on the receipts basis.

NewbieMoneySaver**

ok. Cheers