How much back pay after tax and NI?

Burlesque_Babe

I'm getting 2 years worth of back pay around December/January time.

The total is £2,400 (woooohoo!!)

How much would this be as a lump sum after tax and NI? I'm on just the normal tax code - I've guessed about £1500??

i've been waiting soooooo long for this :beer:

whambamboo

keren29 wrote:

I'm getting 2 years worth of back pay around December/January time.

The total is £2,400 (woooohoo!!)

How much would this be as a lump sum after tax and NI? I'm on just the normal tax code - I've guessed about £1500??

i've been waiting soooooo long for this :beer:

Depends how they do it and how much you earn per month. Will it be paid in one month's pay cheque? If it is it will likely take you over the Upper Earnings Limit.

If you currently earn above £7,185/year, and below £38,335/year, you pay 22% income tax + 11% national insurance, for a total of 33% tax (a lot isn't it?).

However there is a weekly ceiling on NI of £645, above which you pay only 1%. This is £2,795/month.

So if you normally earn say £1,500/month, then the extra £2,400 will attract 11% NI on the amount up to £2,795 (£1,295), and 1% on the remaining £1,105. You will pay 22% income tax on the whole lot. So the total tax payable is £142.45 + £11.05 + £528 = £681.50.

Assuming the £2,400 doesn't take your income over £38,335, in which case you get whacked at 40% income tax, the amount of tax you get paid depends on your current monthly income: for every £100/month that you earn more than £1,500 you would pay £10 LESS national insurance than this (because you would have £100 more at 1% rather than 11%, a difference of 10% = £10). So if you currently earn (gross) £2,000/month (£24k/year), then the tax payable would be £681.50 - £50 = £631.50, and if you earn £1,000/month, you'd pay £681.50 + £50 = £731.50

So it depends on your currently earnings (it would also be different if you are paid weekly), but if you currently earn £1,500/month you're looking at taking home an additional £2,400 - £681.50 = £1718.50

Burlesque_Babe

I'm monthly salaried. It will be added on to one of my monthly payments.

I clear £1530 a month after tax at the moment, although with the increment increase I will clear £1640 a month after the end of November (I won't get the backdated money until January probably). My current salary is £24,340. My new annual salary as of the end of November will be £26,720 (including the two annual increments I have missed out on they have finally sorted out - good old NHS!)

does that help? I'm rubbish with tax!

Mikeyorks

Apologies to anyone who read the reply I placed last night – which was mainly incorrect. Can only plead a dreadful day trying to organise builders / plasterers / joiners – who declined to be organised. So too much on my mind –this version is hopefully more accurate

First of all it partially depends on when your 'entitlement' arose to the back pay. PAYE is normally operated when money is paid. But there are circumstances where the 'entitlement' arose in earlier years - and the PAYE has to be calculated by 're-opening' those earlier years - and calculating the tax on your rates / allowances in force then. Bit more detail here :-

http://www.hmrc.gov.uk/manuals/eimanual/EIM42290.htm

Your pay people should know the terms of the settlement and whether they are going to have to allocate part of the back pay to an earlier year(s)? But -the reality to you (it may affect others more who are due the same settlement) won't be much different. As you are sufficiently distanced from the 22% and 40% boundaries.


Assuming the whole £2400 is paid with your salary in Jan, you will pay £528 tax on that sum – in addition to your normal monthly tax (2400 x 22% = £528).

Had the back pay all been paid earlier in the tax year you could have temporarily been drawn into the 40% band. But you have accumulated sufficient ‘headroom’ at your 22% rate, by January, that it will all fall into that rate immediately.

Apologies for yesterday’s rubbish – if you read it.:o