Paid in arrears (PAYE) - income tax implications

System

nomunnofun wrote: »

Nearly - you are correct in saying that, after the tax sorts itself out, you will still have saved NIC in the manner that you have suggested. The saving will be based on the difference between 12% (not 10%) and 2%.

Right you are, don't know why I said 10% (prob because there is a 10% difference)!

System

chrisbur wrote: »

NI will not auto-correct as tax does; but as you have underpaid I would just forget about it if I was you.

I wish I could but I am one of those types who would worry. I will probably let payroll know (they probably won't do anything about it though)..

jem16

teepee83 wrote: »

I wish I could but I am one of those types who would worry. I will probably let payroll know (they probably won't do anything about it though)..

Nothing to do with payroll really. They have paid you what they owe. The tax situation will eventually get sorted and the NI stays as it is.

agrinnall

Unless you have had or will have a big gap in your NI contributions this tax year the amount of contributions doesn't really matter, so although you'll have paid a little less than you should have your record will still show a full year for pension and benefit purposes. As chrisbur says, just forget about it.

System

agrinnall wrote: »

Unless you have had or will have a big gap in your NI contributions this tax year the amount of contributions doesn't really matter, so although you'll have paid a little less than you should have your record will still show a full year for pension and benefit purposes. As chrisbur says, just forget about it.

Thanks for putting my mind at rest. That was my main worry. Have paid all contributions in full to this point (been on PAYE the whole time). I think the NI shortfall is around £150 (normally pay around £250/month, whereas this 'double month' paid £350). To be honest if HMRC wrote to me explaining the shortfall (I don't know if they would?) I would pay it anyway.

Just waiting for the magical P45 to sort the income tax!

scragend

teepee83 wrote: »

Thanks for putting my mind at rest. That was my main worry. Have paid all contributions in full to this point (been on PAYE the whole time). I think the NI shortfall is around £150 (normally pay around £250/month, whereas this 'double month' paid £350). To be honest if HMRC wrote to me explaining the shortfall (I don't know if they would?) I would pay it anyway.

Just waiting for the magical P45 to sort the income tax!

HMRC won't write to you about the shortfall of NI because there isn't one.

By getting twice as much pay in one month you have paid less NI than if you had been paid in two separate months, but you haven't "underpaid" - you have paid the correct amount for the salary you got in that month. It has actually worked in your favour.

I had a similar thing in reverse when I took two months' unpaid leave a few years ago. Instead of not paying me for two months, my employer paid me half pay for four months. Same result gross but I got the benefit of four months' worth of NI allowance, which would have been lost had I just had two months without pay. NI isn't cumulative (unlike PAYE).

zygurat789

teepee83 wrote: »

Hello, could some knowledgeable people please put my mind at rest.

I recently started a new job in September. Unfortunately my line manager sat on my new starter form and I ended up missing the payroll cut off in September. They had to advance me a sum of money and I received no payslip.

I have just had my October payslip and they have paid my arrears from September, as well as October's pay (they also deducted the advance I received after tax deductions). Put simply I received double pay for this month before deductions.

However I have been heavily taxed (normally a 20% tax payer, but I have paid 40% on a proportion of this pay).

I assume this is because I received a lot of gross pay this month and it had been 'assumed' by the computers that I will earn this every month. Does this sort of thing normally sort itself out on PAYE? Unfortunately I am off work now for a week, so wont be speaking to payroll until I get back.

(normally in a month I would pay £400-500 tax at this salary level, but paid over £1400 in tax this month - averaging £700 for each of the 2 months).

Hope that makes sense.

Thanks in advance.

So, if I get paid by "advances" for 11 months and then get my one and only payslip in month 12; then, if I am not a director, my NI deducted will be considerably less than it would be if I had had 12 payslips during the year. Can this be right?

chrisbur

zygurat789 wrote: »

So, if I get paid by "advances" for 11 months and then get my one and only payslip in month 12; then, if I am not a director, my NI deducted will be considerably less than it would be if I had had 12 payslips during the year. Can this be right?

No it is not right, the only reason that the OP paid less NI was because the payroll dept. processed the payment incorrectly. The payment should have had NI calculated as if it was two separate payments but was wrongly calculated as one single payment. Very unlikely to be picked up by HMRC when happens like this for one late payment; but if it was done for a longer period it would be obvious and the error would be spotted.