Can An Employer take an overpayment in pay in the next tax year

kevink_3

My Husband works for the Post Office Ltd, they overpaid him in (appently) in April, May, June of 2006, and now having disovered this overpayment, have written stating the overpayment and how they will reclaim it. Have now decided to reclaim this overpaid amount, in monthly increments starting in March,through till May.This will cross over the tax year, and i would also like to know if this is Legal ????? Can they reclaim overpayments made by mistake????
Sue pseudonmyn
kevink

MarkyMarkD

Most employers will reclaim amounts they overpay in error. It's reasonable enough for them to do so, particularly if they do so in installments.

The fact it crosses a tax year is irrelevant - the Inland Revenue don't care. Your earnings for tax purposes are what you are paid in a tax year, not what you earn in that tax year.

zzzLazyDaisy

Yes they most definitely can reclaim overpayments made by mistake. The money does not belong to your husband, it was paid by mistake, and he is not entitled to keep it. If he does not want the repayments to cross into the new financial year, it is open to him to agree a shorter timescale for repayment. I am assuming that your husband does agree that the money was overpaid ??

sarahlouise210

make sure that the tax he paid on this money is taken into account. How much has he been overpaid ??

MarkyMarkD

I'm not sure exactly what sarahlouise means, but it is worth checking whether, due to the overpayment, he's paid tax or NI at a higher rate than he otherwise would have done. Reversing the overpayment in future periods might not correct that situation.

It's quite unlikely, though, that this will be the case unless overpayments happened to take someone very low-paid into the NI paying band, or someone close to a tax threshold into a higher tax band.

sarahlouise210

OK ... I was thinking that this company may not really be on the ball regards their PAYE as it has taken them so long to realise their mistake! For example...say he was overpaid £100 - they then deduct £100 from his April pay to repay the overpayment - but what about the £22.00 (probably) that he paid in tax ??? They may not think about that. What should really happen is that the employer recalculates the income for 2006-7 on the correct earnings...works out the tax that should be paid and NI and provides a P60 with those details. The overpayment which was an employer error could then be repaid by the employee but not directly via his wages..through some sort of arrangement. This would ensure that 2006-7 and 2007-8 were showing a true account of actual earnings. It does not look like this will happen but would have been the best way to go about it. In addition, if the additional earnings took him into the higher rate band incorrectly then repaying it back the next year would not help hom get his overpaid tax back for 2006-7.
Hope thats clear(ish) ..not really myself at the moment !:o

MarkyMarkD

I now understand what you mean, but most employers (IMHO) wouldn't bother doing all that. They would just treat it as an adjustment to gross pay in future pay periods, meaning that the tax would "come out in the wash", subject to my earlier points about marginal tax and NI rates.

I'm sorry to hear you are not yourself, sarahlouise - I hope you feel 100% soon.

kevink_3

Thanks Mark amd sarahlouise for clearing that up for me, it just seemed strange as you say that it has took them so long to discover the overpayment, my husband didn't notice it in the wage slips, because his salary changes every month, and his wages slips can be anything up to six pages long listing all his product payments, I sometimes think he may have been underpaid, but its hard to check up on, and who can argue with Post Office Ltd anyway, thanks again