taxation of pay award relating to previous years

number9

In 2006/7 my wife was one of the local nhs nurses who received a back pay award.

This was a reasonable sum of money and it is possible that our combined incomes per p60s may mean we are liable to higher rate tax at 40%,

The pay award relates to several years pay. Without committing myself to the revenue just yet, will the pay award be apportioned over the relevant period to which it relates (ie definitely no additional liability) or treated wholly as 2006/7 income?

number9

just done a little more homework and with bank interest income (from depositing the pay award for house extension) she may be a borderline case.

didn't realise that husband and wife were now dealt with seperately

I was a Tax officer during the mid 80s when I was a teenager so it was combined incomes or wife's earnings election back then.

oldwiring

number9 wrote: »

just done a little more homework and with bank interest income (from depositing the pay award for house extension) she may be a borderline case.

didn't realise that husband and wife were now dealt with seperately

I was a Tax officer during the mid 80s when I was a teenager so it was combined incomes or wife's earnings election back then.

Tax, yes, separately, but I think with (some) Tax Credits husband and wife are considered jointly. Can anyone confirm?

busabus

Al_Mac wrote: »

Combined income doesn't matter, it is individual income, I think in excess of about £32k.

It's a fair amount higher, £33300 + your tax code x10, so around £38k for most.

Bean_Counter

To answer your original question, Al Mac is right, it is taxed when you receive it.

If you go a little into the 40% band, why not consider an appropriate amount of pension contribution?

number9

Checked things fully and just below 40% bt there will be many others locally over threshold as they got substantial awards.

thanks all