Income Tax Overpayment Question!!!

sjoh1271

Hi All,

I was hoping some of you MSE experts could help me. I am due a payrise in January which will mean that I will start to pay tax in the 40% band. As such my situation for the year will be as follows:

Apr09-Dec09 - Highest tax paid 20%
Jan10-Mar19 - Highest tax paid 40%

However for the whole year Apr09-Mar10 I will not have earnt enough in total to be within the 40% band, so will have overpaid income tax for the last 3 months of the year.

How will I get this overpayment back:
- Will my employer make an adjustment to my pay in March?
- If not will HMRC automatically credit this back (how long does this take)?
- Or do I have to make a claim?

Ideally as I know this is going to happen I would like to stop it but not sure how all the systems work!

Your advice would be most aprecaited

sjoh1271

NASA_2

I was under the impression it would be paid back at the start of the next tax year. If you were on benefit this would be paid via JSA/ESA etc. but as you are employed I would think it would be through your wages.

mitchaa

PAYE should self adjust meaning you should pay the right amount of tax come financial year end.

You need to earn over £3650pm GROSS and often more than that if you are in a pension scheme to be in the 40% category.

Oldernotwiser

You will get a better, more knowledgeable response if you repost this on the Tax Board.

mrcow

As you pay through PAYE, your employer should adjust this automatically for you. You shouldn't have to claim anything back if they do their jobs properly.

Just check once you get your payslip (or call payroll and ask the question if your're worried).

sjoh1271

mitchaa wrote: »

PAYE should self adjust meaning you should pay the right amount of tax come financial year end.

You need to earn over £3650pm GROSS and often more than that if you are in a pension scheme to be in the 40% category.

Will the adjustment go through in March though. I will be paying the 40% for the last 3 months of the year, which is correct based on the monthly allowance however the issue will only become apparent when looking at the full year tax paid. I have read that this auto adjusts the month after but April will be the following tax year so will this still be the case or will I end up with an overpayment for the year?

sjoh1271

Oldernotwiser wrote: »

You will get a better, more knowledgeable response if you repost this on the Tax Board.

Which board is this? thanks sjoh1271

mrcow

How much is the payrise - and how much over the 40% bracket is it going to take you?

sjoh1271

mrcow wrote: »

How much is the payrise - and how much over the 40% bracket is it going to take you?

Salary goes from £37k to £48.5k in Jan10. Hence for the tax year I will have been paid ~£40k.

mrcow

Cool okay - so there is a possibility that you may overpay on income tax by about £77ish per month initially.

This shouldn't happen as your employer should adjust for this in January. They can see how much you've earned.

If for whatever reason it doesn't happen, then you either need to get on the phone to payroll straight away and get them to correct it.

You shouldn't end up with an overpayment, but if you do, it's not the end of the world, you can just get it back from the your tax office.

If I were you, I'd call your payroll dept and just check it out now - then you'll know what to expect from them.

chrisbur

What happens will depend on the basis that your tax code is being applied on. If your code is on a cumulative basis then each month the amount of tax you owe up to that month is worked out and from this is deducted how much you have paid so far, the difference is the tax you pay that month. Provided that you are on the correct code then you will pay the correct tax. If your code is on a month 1 basis then each month is looked at separately and you would be taxed as if your pay that month was what you receive all year. In this case you would pay to much tax and would need to sort it out at the end of year, unless you can get onto a cumulative tax before that.