Carrying some earnings into next financial year?

Saver-Rob

Hi all,

As per the end of January 2013 I have earned £41,700 this financial year. My tax code is 818L.

Over the next 2 months (Feb & March 2013 pay) I shall earn another £5000 basic wages. This will take me to a year 2012-13 earning total of £46,700. By this stage I am in the 40% tax bracket I believe.

I have several thousand pounds worth of overtime still to submit for payment. My question is, am I better off waiting until after April 1st to submit these claims? I feel I am unlikely to be in the 40% tax bracket in the 2013-14 year, whereas I already am this year.

1) Will this save me money as I will not be taxed so highly next year?
or
2) Is tax calculated monthly? i.e whatever month I submit the claim, x amount of it will be charged at 20% and the rest at 40% no matter how much I have already earned that year? Will it even out over the rest of the year?

Any guidance much appreciated!

nomunnofun

1) yes

2) Yes and Yes

Is your gross pay before or after pension contributions?

Saver-Rob

My gross is before pension deductions @ around 4% (ish - not quite sure due to recent changes).

Thanks for your help

CLAPTON

a tax code of 818L is unusual ; are you sure?


1. yes

2. no and no and yes

tax is basically a yearly calculation and what matters is your total income (less pension) over the period 6th April 2012 to 5th April 2013

jimmo

Strictly speaking, you are assessable on your earnings when you become entitled to them.

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

Therefore, if you are entitled to claim your overtime now, deliberately delaying making your claim until April or beyond would be seen as a deliberate act of tax evasion, not just avoidance.

I would guess that the chances of HMRC catching you out would be infinitesimal but if they should catch you out the penalty will be pretty severe.

Saver-Rob

Hi both,

Yes, it is 818L as I have a tax break on washing my own uniform.

I don't want to risk anything dodgy so I think I had better just submit it now as normal.

nomunnofun

CLAPTON wrote: »

a tax code of 818L is unusual ; are you sure?



2. no and no and yes

tax is basically a yearly calculation and what matters is your total income (less pension) over the period 6th April 2012 to 5th April 2013

I took the op question literally:

whatever month I submit the claim, x amount of it will be charged at 20% and the rest at 40% no matter how much I have already earned that year?

e.g. the overtime could be paid in May at which point he would pay some at 40% even though his earnings could well be only £10000 for the year to date. It would, of course, even out over the year. I do, however, entirely understand your own entirely correct (as always) interpretation and answer to the same question.

Savvy_Sue

From my novice point of view, I suppose it depends at what point you become 'entitled' to your overtime payments.

For example, our staff are paid any overtime due at the end of the month AFTER the one in which the overtime was worked. In our case, I work out who's owed what, rather than anyone making a claim for it. I'd say that because of the wording of our contracts, they're not 'entitled' to the overtime payment until a month after they're 'entitled' to their normal salary.

Would it be seen as splitting hairs to suggest that the OP only becomes entitled to his overtime payments once he puts the claim in? Does the employer know what he's owed before that point?

Saver-Rob

I appreciate all of the posts and am keen to hear peoples thoughts.

I don't want to get in trouble but if, as people are saying, I would be technically 'better off' waiting until next financial year to make these claims, then maybe I should just go with that.......