tax on overtime question

1jim

Hi everyone

I am on PAYE, dont normally do overtime but in the next 2 calender months I will be working just over a weeks overtime per month. Does anyone know what implications this will have on tax etc, work for NHS, wage is about 34k. Will I get clobbered for tax on this amount? would I be better spreading it out over a few months if I am allowed to?
thanks

1jim

sorry, meant to say this overtime would be a one off event for the next 2 months and back to normal time afterwards

opinions4u

You'll pay tax and national insurance on it at your highest rate. e.g. 20% + 11%.

Doesn't matter when you earn it in the tax year, the amount you pay will be the same.

(Save it, pay off debt with it - don't fritter it!)

1jim

thanks,,,,for some reason I was worried that the extra money in pay would push me in to larger tax bracket.
I dont normally do overtime- but did some over 10yrs ago in a different job, irrc too much tax was taken because the computer assumed that I would be earning the same amount every month.... then couldnt get the money back in lump sum it ended up being repaid by change in tax code the next year


I seem to be rather like you opinions- dont have any debt (except mortgage), dont have any loans, pay credit cards off in full every month and only use these to get cashback :-)....... but if overtime is in the region of what I expect it to be over the 2months there may be the odd treat or two....purely to boost the economy you understand

ShaneUK

I think you may end up getting taxed at the higher rate, if the amount you earn that month x 12 (assuming you are monthly paid, and not four weekly - if four weekly, x 13) goes above the higher tax threshold.

sammatty

The higher rate tax bracket is nothing to be feared. A "normal" tax payer will have personal allowance (for 2011/12 tax year) of £7,475, then basic (20%) rate band of £35,000. Only income over £42,475 would be liable for 40% tax, and not the entirety. So don't fear higher rate earnings, you will still be better off!

chrisbur

ShaneUK wrote: »

I think you may end up getting taxed at the higher rate, if the amount you earn that month x 12 (assuming you are monthly paid, and not four weekly - if four weekly, x 13) goes above the higher tax threshold.

This would only be the case if OP was on a non-cumulative tax basis. They are proberbly on a cumulative tax basis so paying at the higher rate would only happen if their total earnings to date were greater than the higher rate starting point to date.

CLAPTON

it depends a bit on how much extra you get for working overtime but if it is simply a week prorata salary (i.e. 34k/52 = 654 then there is no possibily of being charged at 40%
even if a very small portion of your salary was taxed at 40% then it would be refunded the following month automatically

to pay 40% tax without refund you would need to earn 42,474 in that tax year (after pension deductions)

and NI is 10.4% or 12% depending upon whether you are opted out of the second state pension (most likely if you are an NHS worker)

kevin52

Don't forget that pension contributions are paid before before calculation of tax so this increases your non taxable pay.

heretolearn_2

It's a valid concern - getting a lump sum CAN push you up a tax bracket for that month, but yours won't as it isn't enough. It's normally people getting a several thousand annual bonus who should try and get it spread out.

chrisbur

heretolearn wrote: »

It's a valid concern - getting a lump sum CAN push you up a tax bracket for that month, but yours won't as it isn't enough. It's normally people getting a several thousand annual bonus who should try and get it spread out.

Tax will be the same by the year end however the bonus is paid, but spreading it out may well increase the national insurance that is due.