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2 years back pay taxed at 45%???
Comments
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Good thought DVS - although I don't think it will put the OP into the tax bracket, even with the additional salary and the lump sum. But if it does, definitely worth checking out.
KiKi' <-- See that? It's called an apostrophe. It does not mean "hey, look out, here comes an S".0 -
Does anyone any advise on this?
After almost a year of battling with my employer regarding unequal pay they have agreed to increase my salary and back date it to two years.
My gross salary is is circa £26k basic + £4176 (london weighting) = £30176
The back pay comes up to approx £9k of which they have given me 55%, claiming 45% for tax and NI???!! They have also stated that from next month I will continue to be taxed at 40%.
Surely this can not be correct?I would have not been taxed such a high rate had i received the salary I should have been receiving two years ago, nor would my current salary continue to be subjected to a 40% tax rate.
I'd grateful for any advise on this.
Probably a querk of the PAYE tables keep an eye on the next months pay and it should sort itself out by year end.
£30176k + £9k(back) + £4.5k(rise) is still below the 40% threshold(43875) with a normal personal allowance.0 -
Sorry Madjock but they are correct! I didn't realise this, either, until I had to do tax returns for the last six years. There were three years that I thought I was in the 40% bracket, but I wasn't once the personal allowance is taken off. If your salary is £38,000, you won't pay 40% tax at all. The £37,400 level is actually the first *taxable* £37,400, *after* the personal allowance, exactly as jem16 describes above.
For Mwd:
If your salary is £30,176 and your increase is £4,500 per year then you won't be in the 40% for future years. Even in this financial year you won't be in the 40% tax bracket (assuming it's EXACTLY 4500, you miss it by £200!), so yes, you are absolutely correct.
However! Tax is worked out as an average, and receiving a £9k lump sum in one pay packet will make HMRC think that you're suddenly earning a huge amount more. So they will tax you accordingly - and then by the end of the year as it becomes apparent that the £9k was a one-off and you won't be in the 40% tax bracket, you will pay less and less tax and it will all work out correctly by April 5th. (If it doesn't, you can put in a claim for a rebate, but it should work out correctly through PAYE.)
(As an example: in 2008-9 for the first 6 months I was PAYE, on 40% tax. The second 6 months I took an unpaid six month career break. HMRC began to realise that I wasn't being paid, and therefore I would no longer be in the 40% tax bracket come the end of the financial year, so although I wasn't getting a salary, I was receiving tax rebates whilst I was on my break. Come April I had, in total, only paid the lower tax rate.)
It's a simplistic answer but I hope it helps.
KiKi
Ahhh that makes sense if it's only a temporary! Simplicity is appreciated- i've got myself really confused over the whole matter!
Maybe i didn't explain this properly in my initial post -The £30k is my new salary with the increase - £4k of this the standard london weighting that i've always had - so £26 is my new basic salary without LW.
This increase has been backed dated to two years, resulting in a back pay of £9k gross
So in total at the end of the tax year ,with the back pay i would have earned circa £30k (gross salary) + £9k (back pay) = £39k
Does that make sense?0 -
So in total at the end of the tax year ,with the back pay i would have earned circa £30k (gross salary) + £9k (back pay) = £39k
Does that make sense?
You're not in the higher rate tax bracket with those figures. Overall you will only pay tax at 20%.
However for one month with the backpay you got, the PAYE system thinks that you will continue to get that in the next months too. It's not clever enough to work out that it's only for that one month.
Next month when you go back down to your normal month's salary it will recalculate and you will get some of the extra tax back. Over the next few months you will get all of that extra tax back.0 -
I really don't do maths - but have to got this right? If your gross salary to date after six months is 2514.67 , then I make it that your annual salary is just over £5k ! That's one hell of a pay rise to £2500 pm
OPPPS. That is the gross monthly that i've said above. Total ove last 6 months is £14421.0 -
You're not in the higher rate tax bracket with those figures. Overall you will only pay tax at 20%.
However for one month with the backpay you got, the PAYE system thinks that you will continue to get that in the next months too. It's not clever enough to work out that it's only for that one month.
Next month when you go back down to your normal month's salary it will recalculate and you will get some of the extra tax back. Over the next few months you will get all of that extra tax back.
That makes sense..i got my pay for sept and received the back pay a few days ago ( it isn't on my sept pay slip) , and with the break down they put that from October i will be taxed at 40%. ( im not sure if they are going to put the back pay on the october slip) So I take it from November it will all be recalculated..0
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