Two months pay paid at once - huge deductions

jweb2k

Hi all,

My partner handed in her notice for the end of the summer as she found a new job. The local council payroll department have paid her July and August salary in her July wage packet as this is apparently "standard procedure" which has caused her tax, national insurance and student loan payments (usually £100 in total - with no student loan paid) to go up to over £500 for the July period. Ringing the council has had no luck - they've said there's nothing they can do about it but it's left us £300 out of pocket through no fault of our own.

This affects our financial situation badly, with a mortgage to pay in both months and money tight - does anyone have any suggestions of what to do?

Thanks on any responses,

Suarez

Without YTD figures, amount and tax code there is not much advice to give. Tax is cumulative so you won't pay anymore than you would have provided your tax code is correct.

agrinnall

The tax will sort itself out at the first pay with the new employer. NI is quite likely to have been higher than it would have been had the pay been done in two separate months (although it could also be lower in some instances, but that doesn't seem likely here), but I'm not sure whether this is a circumstance in which a reclaim could be done.

http://www.hmrc.gov.uk/ni/refunds-complaints/claimback.htm

I think you probably can reclaim the student loan payment but I'm not sure how, hopefully somebody else will know.

jweb2k

Thanks agrinnall - we thought it was unlikely we could reclaim the student loan payment of £79 as in student loan company's eyes she has earned more than the threshold in a single month (but obviously won't be paid anything at all in August...)

As you said, the tax will hopefully sort itself out.. but I imagine over a staged number of months that doesn't really help our summer! Claiming the NI back would be a start (£170 instead of £88)... it's just rather annoying that the local council as an employer can do this! The lady she spoke to was very unsympathetic towards the error - or rather, didn't see it as an error at all that two months pay were provided in one.

jweb2k

I've just checked regarding student loans - it looks like she can reclaim it as she does earn under £21,000 a year.... but will have to wait until the end of the tax year(!)

comeandgo

You can't claim NI back. The council have done nothing wrong. They may have made things a bit easier on you if they had run the pay as a holiday payment but then you would have the same problem, high tax and NI when you got first pay from the new job.

chrisbur

The following is from the employer's guide CWG (2014) page 31
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/300136/CWG2_2014.pdf


"Working out NICs for employees not paid
on their usual payday
Take the following action if you pay employees on a day
other than their usual payday, for example, you bring the
payday forward because of a bank holiday or you pay two
months’ salaries together to employees who submit their
timesheets late. If the actual date of payment and the
usual payday are:
• in the same tax year – treat the early or late payment as
if it had been made at its usual time.
Example
Two separate weeks’ wages for weeks ending
6 June and 13 June are paid on 13 June. Work out
NICs separately on each week’s payment. Record the
NICs information for the late 6 June payment on the
employee’s payroll record for 6 June and report to
HMRC on or before the date of payment."

If two months salary are paid together the NI should be the same as if they were paid separately.

chrisbur

comeandgo wrote: »

You can't claim NI back. The council have done nothing wrong. They may have made things a bit easier on you if they had run the pay as a holiday payment but then you would have the same problem, high tax and NI when you got first pay from the new job.

There is no carry forward of NI details as there is with tax so a new employer has no knowledge of what NI you have paid in your old job. NI is decided on your earnings in each earnings period so it would not be affected by what happened in your old job.

Indie_Kid

jweb2k wrote: »

I've just checked regarding student loans - it looks like she can reclaim it as she does earn under £21,000 a year.... but will have to wait until the end of the tax year(!)

The £21k figure only applies to post-2012 students. It's around £16k for pre-2012 students.

jweb2k

comeandgo wrote: »

You can't claim NI back. The council have done nothing wrong. They may have made things a bit easier on you if they had run the pay as a holiday payment but then you would have the same problem, high tax and NI when you got first pay from the new job.

I think I may not have explained this correctly - my partner should have been paid a full month's pay for july, and a full month's pay at the end of August as she is contracted until 31st August. Her notice stated to leave on 31st August and there is no holiday pay associated with her job (such as with teachers).

The council should have paid her wage in July as usual, and then in August as usual with her contract ending on the 31st August. Instead, the council have paid her the July salary in part, then a Balance Payment Due to make up the remaining July/August wage and taken her off the payroll system. This has caused the extra tax, NI contributions and student loan to accrue.

As an example - she could have handed her notice in on August 1st - at which time she would have received her July payslip as normal, and then her August slip as normal without the extra tax accrued.

I hope that explains it better!

makeyourdaddyproud

The deductions are huge because most payroll system adopt a week 1 month 1 method and having two gross payments in one earnings period (month?) meant the system taxed and NI'd you as someone earning twice as much in the one period. That is completely different to two separate deductions.

It looks like its took you over the tax and NI threshold into another higher earning bracket.

This means you may have overpaid tax and NI appropriate to your salary at the old job and this wont be corrected by a new employer.

When you get your P60 next april (if working at April), apply for a tax refund based on the skewed figures.